Sunday, July 31, 2011

Will US debt get downgraded?

I doubt anyone has a sure answer on this. Rating agencies will get harassed by US gov't (if they haven't already) if downgrade comes. I think that it will mark the beginning of the end for those who will downgrade US (but I really do not care).
We are to be prepared for the downgrade nonetheless. Let's go over the scenarios if it comes.

1. End of rally for equities I say. It will create an unnecessary weight on equities. Many huge players will be scrambling to find a safe place to hide the funds coming out of AAA securities. Stocks are too vulnerable here for a safe bet. Sell first, ask questions later will be the name of the game. Risk off as soon as downgrade is announced.

2. Dollar takes a one-day hit but then turns around due to risk-off trade. It has to be a pretty huge move for equities to trigger a u-turn in DXY. So I say wait for a climax selling in stocks to develop, but I personally will be watching a test of 73.

3. Due to risk-off trade all risk currencies will get dumped. AUD, CAD, GBP, and EUR will get hit across the board (after initial one-day rally). JPY and CHF will shoot higher, not sure for how long, as SNB and BOJ will be looking to curb the rise somewhat.

4. Gold shoots higher and oil craters.
Gold goes opposite of risk lately, but really has its own bull mind developed. It just wants to rally on any occasion. Could there be a better one than US losing AAA debt rating? Raging bull...
Oil is a simple 100% correlation to SPX. So it will follow down without any hesitation.

Many will doubt my theory of gold and dollar going higher, but it can happen during turbulent financial market times.

UPDATE Aug 1 10:15 am
Wow, is this trade already on???

UPDATE #2, Aug 2 @ 8 pm
Fitch and Moody's (wisely) decided not to play with fire, and affirmed US AAA debt rating. They did warn that outlook is negative and downgrades could still happen, if economy slows down considerably and debt cuts are not enacted soon. This leaves S&P. I bet they are waiting for this market turbulence to stop first, so not to aggravate the issue at hand. They may downgrade US debt, once we have a rally.

UPDATE #3 Aug 5 @ 12:50 am
Now that we are 12.5% off the high on SPX, it will be interesting how the market reacts to a possible downgrade by S&P. It may actually rally, in sell the rumor buy the news effect.

Futures Update Week of Aug 1 Sun Night Open

News of a deal is sending risk trade higher. Equity futures, commodities, and commodity-related currencies are all rallying. We have one possible negative: Mrs. Pelosi & Co., but I think she just wants her say in the thing, as well as some spotlight back (after losing House speaker title). Come Monday afternoon or night, we will have a deal, and signed by President debt ceiling raise. I predicted it all a month ago, a race to the wire, eleventh hour fight, but a final outcome just had to be a deal. I said that all of this would weigh on equities in July. We did not lose 777 Dow points in one day, but we lost 670 points since July 7.
Due to this circus in Washington, we now have a well-defined picture-perfect double top on Dow @ 12751 (on 7/21), which itself is a lower high compared to 5/2 high of 12876. This technical picture along with deteriorating economic conditions will put a question mark on a long-term rally. But rally nonetheless will happen, as we just broke out of a falling wedge on YM_F Dow futures I mentioned a few days ago Give the rally a few days and about 350 points. Just to inflict maximum pain on shorts, longs may take the price above 50 dsma, but my view is the end comes at a 8/21/50 dema and 50% fib crossroads. Not a bad idea to be long to that point. Hey, all we traders do is ride the wave, after all. Trail your stops though, as u-turn could be fast and vicious.

Watch Chinese Mfg PMI report tonight. The only hope we have left is world economy rebounding, as ours is slowing down to a halt. Somehow I think that world economy is going to be a problem as well.

Update 1
Chinese Mfg PMI is out. Barely above 50. Saved by 0.7 of a point from contraction. Next important number is ISM Mfg PMI tomorrow morning.

Update 2
HSBC Chinese Mfg PMI out @ 49.3. Oops... Contraction is a number below 50.
Taiwan PMI out @ 46.1 - oops again.
Folks, are you getting the picture yet?? 

Friday, July 29, 2011

Canada Economy

Totally lost in the shuffle today was the weak econodata from Canada. May GDP was negative 0.3% and mostly attributed to oil and gas industries' slowdown. I wrote a piece earlier discussing this phenomenon of Canada's economy direct correlation to oil and US economy

CAD dove on this news, and traders are now focused on rate hike being less likely. To make things even worse for those who expected a hike, this morning Canadian wholesale prices report showed a decline vs expected rise, and by a lot I would say. Bummer!!
Not a surprise folks. Mr. Carney's comments from June gave us the hint. Somehow we knew well in advance...

This development takes care of one of the closest stock market-correlated currencies. Plot CAD over SPX and you will see what I mean. This is a hint where SPX is heading.
Furthermore, it will help DXY to bottom.

$TNX $ZN_F Update

When I posted on July 11 that TNX is heading to 2.5%, many probably thought that I lost my mind.
Well, it now looks more likely, doesn't it?? We just closed at the lowest yield of 2011, right at 2.8%  You can attribute this to debt ceiling, risk-off, and European worries, but I think the biggest factor contributing to 10 yr yield is our ailing economy. It is going to be very tough to get back above 3% meaningfully if we do not get economic reports to show that 2nd half recovery is starting. None of them showed it so far, so next week's reports are going to play a huge role. Watch the yield to crater down to 2.5% and then 2.3% in not too distant future, if poor news does not turn around fast.

$SPX Futures Technicals $ES_F

One can't miss the fact that falling wedge has developed on SPX $ES_F futures. For that matter on all of US Stock Index Futures as well - YM_F, NQ_F, TF_F. Falling wedge is a bullish reversal pattern.

So shorts are on notice here. No need to be a hero, you got a big chunk in the middle and it is time to be thinking to give longs a chance. This said, any meaningful bounces will be met with enormous selling by all of those who now realize that this sell-off is more about the economy and less about the debt ceiling. 50 dsma is a major resistance for now, with 150dsma just above there as well. If those are not enough, just 7 points above there is a laminate of 4 waiting for longs to be met - 8dema, 21dema, 50dema, 100dsma.

We have a golden opportunity to trade both sides for a while longer. Play the retracement, and then short them again.

Good Luck!!

Market Thoughts for Next Week

We are going to have a very busy week of August 1. A lot of econodata, earnings, and debt ceiling dilemma. My plan is to be flat until Sun night (start of forex and futures trading), and digest any possible developments out of Washington. Today is just too wild of a day to be chopping the trading account. I will say this again: nobody ever gets all the moves, except for liars.

So my very important message for next week is: ECONOMY. I am starting to think, no, I am already certain that we are heading for some extremely turbulent times in the market, due to bad economic news. 2nd half recovery is no sure thing now. We are going to have (starting with Chinese PMI on Sun night) very important economic news releases next week, which will culminate with NFP on Fri. I think that they will be more important than the debt ceiling. Funny how "it is" all about "the economy, stupid".

And why is the market not going up on better-than-expected Q2 earnings? All good corporate news have been cancelled by debt ceiling drama. So the weight of economic slowdown around the world has tipped the scale. Watch those reports next week for defining moment in the market's next move.

Market Update Stocks Commods Forex

What is usually a calm time of the year, summer has turned out to be absolutely nuts. And we are just getting started I say. SPX index futures are testing 200dsma. There are a lot of players who buy on these tests. Today will be no different. Wait for a meaningful bounce to short. Why short? We just got preliminary Q2 and revised Q1 GDP, which has showed that we are starting to look like Japan of the last 20 years. Care to look at their stock market chart from 1990? Before you throw any stones at me, I am just reporting, do not shoot the messenger. So, many traders will let the SPX bounce into 1295, and will pull the short trigger. Do not short the QQQ, NQ, NDX please. AAPL, GOOG, PCLN, AMZN, and BIDU are going to muddy the waters for shorts there. If you want to do it selectively, short SOX.

Oil is sinking like a rock this morning. Absolutely no surprise. World economy is grinding down to a halt again. Watch 95, has been a support and will be bought temporarily. Should SPX break 200dsma, watch out below all the way to 90.

Gold is now the only sure thing for traders to go to on the upside. This is a raging bull, and my next paragraph is going to show why. 1610 support has held and all-time highs are being poked as I type

Forex is totally screwed up. GDP report put out some mixed signals on where to go from here. CHF and JPY are hiding places and safety. CAD is getting demolished due to 100% correlation to risk, commodities, and US economy. EUR and GBP are all of a sudden up with US ugly spotlight brighter this morning, no deal in Washington, slower GDP - you peak the reason.
This goes on for not too long I say. Watch for Dollar safety to reemerge in 24-48 hours. As risk-off picks up the steam, DXY will turn around and will head MUCH higher. You heard it here first. Yes, gold and DXY up together. Sounds familiar?

Econodata July 29

We do not even need to wait for Chicago PMI @ 9:45. Preliminary GDP stole the day. What an UGLY report. I am stunned by Q1 revisions! Many cheerleaders will try to put a lipstick on this pig, and will say "this is rear view mirror", but I doubt anyone listens to them today. This said, we have a Jackson Hole, WY meeting of masterminds coming up. This was the venue Mr. Bernanke used last year to prop up the risk-on trade, when he unveiled QE2. Do we get a repeat??

I will update after 9:45 am Chicago PMI.

Chicago PMI out - weaker than expected.

Thursday, July 28, 2011

Late Night Thoughts

It is 11:35 pm edt and US stock index futures are cratering due to no vote tonight. There are a few pretty huge implications for tomorrow's session because of this.

1. Major players will be selling early tomorrow. Summer weekend lack of liquidity will worsen the trading conditions later in the day. Big guys will sell in AM and hit the road to vacation homes.

2. To exacerbate the things further, preliminary 2Q GDP will be out @ 8:30 am edt, followed by Chicago PMI @ 9:45 am edt. I think if those two are weaker, we are going to have a climax selling into European close @ 11:30 am. Stabilization at lower levels will be the plan for the rest of the day, especially if politicians throw nasty accusations at each other on national TV about who's fault it is that we are going to default. Will not be pretty at all folks.

3. Dollar index is getting weaker just after "no vote" news. I suspected this would be the outcome if Washington train derailed. Wait for further weakness to get back into buck. If your stops (after scaling out some) are still below here, hoping not to get stopped out is the only thing left to do. I still think DXY gets it going if end of the world is the theme of the next week. Give it 24-48 hours to sink in. Anything below 73 is a screaming buy. Just look at treasuries. They are up as I type! Aren't we about to default??

4. Do not get complacent. It will definitely not be a one way street. SPX 1284 and 1275 are supports. There are a lot of money sitting and waiting to get in on weakness. We are in the middle of the earnings season which produced above expectation results, with respectable guidance as well. So investment public is ready to buy, as they have been taught for decades, on weakness.

Good Luck tomorrow.


Market has ran into suspected resistance @ 15min200 and turned around hard. Our politicians are the best contrarian indicator, spoke just in time to coincide with technicals. Today was one of the purest and easiest tow-way trading days of the year, surprisingly. If you made the money sit out the vote time. Perhaps it will not even matter, as we understand it now, Mr. Reid and Co. will reject it in senate. Uncertainty breeds opportunity. Use it to your advantage.

ES_F SPX futures closed at low of the day. Traders were ready to sell the rally, and used some mildly better economic news to lighten up positions. Risk-off environment continues for a while longer. 50 dsma served as a resistance on cash index. Next support comes in @ 1295. Here are the levels to watch if things really progress towards the worse

$DXY Update

Inverted H+S has developed. Distance is about a full point. I am not sure what else can be done but to trail a stop if you are long. The 74.50 resistance is proving to be tough at the moment, and trendline from y/day low is being tested as I type. Some index components are not cooperating right now, and the long trade is starting to look a bit heavy. No reason to panic, if you have your stop in you are safe. Should our leaders decide to screw up the American dream, dollar index will dive and perhaps not only challenge the head of aforementioned H+S, but the low of the year as well. This said, I will be looking to buy that reactionary low, because the equities and all risk will get sold off as well, and before too long the traders will remember that there is no safe liquidity greater than dollar. Swiss franc and the yen can not compete on that, and the central banks there are waiting to intervene on any severe overreaction. Should that happen, dollar index will go parabolic, as it has done during major risk-off times before.

Trading Plan Before The Vote

Can there ever be a plan for trading on news? It all depends on your positioning ahead of the news. So let's look at variables.

1. You are already short. First of all, congrats!! Second, have you been trailing the stops, and perhaps got stopped out on this mornings retracement? Depending on where your stops are you may still be in. Important thing is you have a stop, I really hope you do. Why trail down? Because you do not want to give all of your profits back, or god forbid, turn a winner into a looser. If you are short NDX you are definitely stopped out. My idea on NDX - do not short it. Leaders always rebound first, fast, and more. Just short the laggards.

2. You are long from this morning. Congrats again!! Trail your stops for god's sake. Market is going to get worried about the vote mid-day I bet. Memory is a funny thing. Traders still remember Dow 777 decline on first TARP failed vote. You did a great thing by catching a lower open and running with it. But overhead resistance is not too far from here at 15min200 I say. So ES_F 1315 and NQ_F 2395 are your exits and take a breather please. Wait for vote, market will still be here after 6 pm tonight. I guarantee it.

3. You are flat. Feel left out?? Do not worry. I never saw traders who could be in every market move. The ones who say they do are liars. Good traders miss the moves all the time, for different reasons, too many to list here. Come 6 pm you will feel good, as some players will understand what it means to go through the news event with a position on. Be flat, be safe, but be ready to act after the vote. Strategize about all of the outcomes and their consequences. Keep your mind fresh until then. Do not listen to talking heads on TV, they are all fake actors. Sit down and write the plan of action for tonight.

Good Luck!!

EUR/USD Update

All targets I mentioned y/day are achieved.

Price is hanging @ WP at the moment. No reason to be jeopardizing the profits as possible deal may be voted on today in Washington. If passed will give risk the green light, and prop the Euro a bit. Cover and relax for a while. Congrats!

Wednesday, July 27, 2011

Caution, Shorts!

I want to emphasize the importance of caution in times like these. It is both wise and safe to trail your stops down. There is no one way street in this market. It will bounce to punish complacent ones, johnny-come-latelys, and those who just have no idea what this game is all about. Be smart, we have sold off 4% from 7/22 high. If we get a hint of a deal - we rally. Shorts will cover and longs will initiate. Play the game, learn the rules, trade both sides, and be safe. SPX 1295 is the line in the sand, IMHO.

Econodata July 27

I am a bit behind on this, has been a crazy day in the markets.
Anyway, we got a weak Beige Book report. 8 out of 12 reporting regions are slowing down. Labor markets are stagnant. Loan demand is so-so. Real estate is mostly weak. Auto sales were mixed (due to Japan quake supply disruption). Manufacturing slowed down. But consumer spending increased, hurray! We are like drunk sailors, just can't stop.

Durable goods orders report came in weak this am. Not a good report even excluding transportation. Some say this report is a volatile series of data. I say with inventories building at slowest pace in a year, we are to pay serious attention to this development, especially on the heels of weak PMI data we have been getting.

Folks we are slowing down for sure. No two ways about it!!!  Who cares about the debt ceiling now? Sell on any rallys I say. But do your own research PLEASE.

DXY falling wedge

Well EUR/USD rising wedge reversal is helping our DXY falling wedge breakout trade. Use some caution, but start looking here. Also other DXY components are starting to look like they are taking a cue from Euro against the dollar. CHF and JPY are ignoring the developments so far, as they are risk off instruments like the buck, but CAD, SEK, and GBP are reversing and heading way lower as I type.

Levels of resistance to surpass are: 74.30 74.50 74.70 74.90 and 75.10
Will be tough but doable if it gets going...

UPDATE 1 pm edt
Finally, CHF and JPY are now afraid of dollar as well, and are starting to respect the king. We now have all DXY components cooperating. This trade just got more steam. Use pullbacks to reload...

EUR/USD rising wedge

It just never stops working. This amazing pattern has done it again. We have a break of rising wedge and a violent reversal. Scale some out and trail your stops down. You just never know where this takes us... Levels on the downside are: 1.4325 1.4298 1.4283 and 1.4272

August is a risk off month

I am amazed at how many traders are currently delirious and are avoiding the fact that we are heading into August, which is historically not the best month to have the risk on. We are getting closer to debt ceiling resolution, it may give the market much needed boost to challenge 1370 high. It would be prudent to use that rally to lighten up. It will be too late when we start getting down right ugly economic numbers in August. Unemployment will be the first and the worst of them I bet.

Market Update: Stocks, Commodities, Forex

Market is continuing to take the risk off. Equity futures are following overnight action in overseas markets. Everything is selling off (with exception of China, those folks are in their own world). ES is sitting on DS1 and is backtesting the low of the week. Long gone is support @ WP 1327. Double bottom folks are loading up here as I type. Some may think this is the end of selling before solution of debt ceiling. I say let our politicians surprise us one last time. If you are short, trail your stops down and let them duke it out on the hill. Scale some out though, do not be greedy.

Oil is following the equities. It had a fake breakout y/day. Always wait for confirmation of these box breakouts. And equities did not confirm. We are back into the box.

Gold made a new all-time high overnight, and is laughing at all of us who said it had to cool off. I never doubted the long-term trend, but thought that in short-term it had to sit it out. Wrong...

Forex was confused overnight by AUD action. But I am more interested in dollar index reversing out of the falling wedge. Have my two eyes on it and will try to update you folks as I can.

Durable Goods report was just released, way weaker than expected.

UPDATE 4 pm edt
Do not be greedy and scale out!! Note to self :)

Tuesday, July 26, 2011

Forex Update

Some wacky moves in forex during Asian session. Couple of contributing factors, I will try to make some sense out of them.

First of all, AUD is flying due to higher than expected CPI, reported just now. It is running at annualized rate which is way above what RBA is tolerant for. So, maybe another rate hike soon?? Last RBA meeting minutes revealed less than hawkish tone, and some traders even called for a rate cut soon. Well, they are all covering as I type, sending AUD/USD to all-time high. You got it folks - no resistance to speak of. This move is wacking all AUD crosses. I had a small AUD/JPY short on, it is history now. I was out of there in an instant... All of this is going to put some pressure on RBA for more hikes. This said, Australia's economy is mighty good right now and could withstand higher rates for sure.

We also have some weakness in JPY crosses, in continuing risk-off environment. Yen is getting stronger across the board, except against AUD (sadly I ended up with that). This is happening despite BOJ's repeated warnings to intervene any time now, because of Japanese adverse economy consequences due to higher yen. Obviously exports would take a hit with strong domestic currency.

So we have EUR/AUD and EUR/JPY weakness affecting EUR/USD. And Gold, not to be outdone, has decided that it is time to wake up and print yet another all-time high just now.

I would caution against taking big dollar shorts here. It looks like it wants to reverse. DXY falling wedge has developed, if it breaks out to the upside, the buck may get much needed boost, and many traders will call for a dollar index double bottom. Dollar is ultimate risk-off beneficiary; even in debt ceiling crisis it has ability to rally hard, especially if traders really decide to take all risk off. Watch these developments closely.

SOX still diverging

Let's revisit the SOX technicals and fundamentals.
It is still diverging from NDX. Price is backtesting 50 dsma as I type. Downtrend line from 5/12 is just above here. This pattern reminds 7/7 backtest which failed miserably. Let's see what transpires.

BRCM and TXN reported last night. Mixed signals are coming out of semiconductor sector. Some companies are going strong, while others are slashing the outlook. I am not an analyst to digest in deep detail, but seems like those chip co's who positioned themselves with APPL and other strong mobile suppliers are going to be just fine; while others who have missed the mobile boat are struggling to find their new growth source.

Let the SOX chart speak for itself. Plot it over the NDX chart and see the result for yourself. We were early here to identify the problem...

UPDATE July 27 1:05 pm edt
Failure @ 50 dsma it was again. NDX is taking cue from SOX - the most cyclical component. To add to worries of traders are some of the ugly earnings from likes of JNPR. The latest discussion revolves around a thought on who in the world will spend for tech upgrade once US Gov't is in austerity mode? IBM better watch out!!

Econodata July 26

We are continuing to get weak Mfg data. Richmond Mfg Index came in negative today. I will say it again: this is a precursor to overall economic slowdown, as manufacturing is the most sensitive sector in slowdown. It is also the first to show any weakness.

New home sales came in weaker than expected. They are not accelerating at a pace to show any sustained recovery. As the matter of fact, we got a mo/mo decline. Very disappointing after a good number we got earlier.
Also we got Case-Schiller. It showed some seasonal improvement in prices, but yr/yr is down still - 4.5%. So we wait longer for biggest asset of consumer's - housing - to recover. Bummer!!

CB Consumer Confidence came in a bit higher. Surprised economists and showed renewed confidence for a change. While the # was quite low by measure (2nd lowest in 8 mo), it still shows that consumers want to feel more upbeat about 2nd half, hoping for more jobs ahead. I do not want to be a wet blanket here, ain't no real jobs out there for everyday folk to speak of. U6 is going the wrong way, and pushed back above 16% in June. What a sad story...

Futures Update July 26

US stock index futures are falling. ES is being supported by the weekly pivot at the moment. This is the 1327 support that I mentioned as a pivot for the continuation of this latest bull leg. I doubt it will hold. The only reason it is holding is due to NQ buoyancy after BIDU and BRCM reports. Do not short NQ I say, do not short the leader.

UPS reported this morning. CEO said that company's economic outlook is "a little muddier". I am really starting to think that world growth will be a problem in 2nd half. They (CEOs) just do not want to say it in the open yet.

Oil decided to dive 2 bucks from session high. Not sure what is going on just yet, but usual risk off with equities would suffice for a reason. $100 is still a brick wall.

Gold went to sleep for sure. It is ignorant to anything here. What a strong bull it is. Leave the sleeping giant alone... 


It has been a while since we discussed Euro vs Dollar. But these are wacky times when the ugly competition between the two is messing up the technical picture. Yet I think a trade is setting up to go short Euro again. We now have a well-defined rising wedge on EUR/USD. You know what I am going to say next: it is a bearish chart formation. For this matter I also like the dollar index higher, once EUR/USD breaks down. DXY may be a lagging vehicle due to strength in other components against the dollar continuing. This said, if equities will become weak in August dollar index will benefit, and the usual risk aversion it associates with may give it extra boost. All of this is preparation for the trade, and thoughts only, as the bearish picture in DXY is continuing. Stay tuned for my updates on this possible development.

Monday, July 25, 2011

Market Thoughts ahead of the speeches at 9 p.m.

I do not see how 9 pm national address, without any agreement, could be good for markets. I feel that President may spook the traders tonight. Fear mongering may be escalating a notch, by competing views being displayed in the middle of a TV primetime (Mr. Boehner's address follows the President's speech). I respect everyone's views, but mine is to sell ahead of the speech. If I am wrong I will cover and admit defeat. Charts are supporting my view: 15min200 is a resistance, uptrend channels have been broken and are now resistance, divergence in momentum is widening, etc. Our politicians are like a sell signal, every time they go on the television. How sad... 

Market Update

I was just about to write my update, and Mr. Reid and Co. appeared on TV. Now my update is a bit different. I am NOT amazed at how partisan our politicians are just 8 days away from the deadline. I am so sure they will take it to 11th hour, nonetheless there will be a deal at the end.
I am impressed with the way market behaved from the open. Any attempt to sell it down was met with more buying. There is some money which is still being put to work I guess.

$SPX futures $ES_F has ran into selling @ DP. It closed the gap and now it has no business to be up here. Look for weakness into the last hour, and more after the close if Boehner's tone is the same like Reid's. I heard the word "default" mentioned more often than any other word in Dems' presser. How enlightening folks!

Oil futures $CL_F sideways in a $1.25 range. $100 is a brick wall so far. It is following the uncertainty as best as it can. Equities are the key for direction on oil.

Gold futures $GC_F sideways after runup last night. Not really doing much since then, due to no deal. Prior high @ 1610 is serving as a solid support at the moment.

Forex is going nowhere fast as well, except for CHF. The king of risk-off is ruling today. It is up by a lot against all other currencies.

Keep your size small. Stay tuned to Washington circus developments.

Sunday, July 24, 2011

Market Update

S&P futures are falling due to no deal in Washington. This political theater is not new to traders, yet they want to protect their gains and stay risk-avert at the moment. Will there be a deal? I am tired of trying to answer the question. Bipolar personality of this market is granting us a chance of a lifetime. Use it to your advantage, deal or no deal.

$ES_F is trying to keep it together. Gapped down on open and seems to stabilize here in 1330 area. I mentioned this support and 1327 (weekly pivot) as well. In the moment of fear nobody pays attention to fundamentals or technicals, but traders, who have no emotion and are able to trade in these volatile times, will get rewarded for staying patient and composed. Stay short until you see a deal. No need to worry, our politicians will never cease to amaze us. Give them another 200 $SPX points to think. If $SPX cash breaks 1327 we are going to see a major sell-off. My new $SPX levels on the downside will be the targets

Gold $GC_F is in heaven again. I was wrong to think that it will be weak in a short term. Hard to trade erratic consolidations, but staying long or flat until the deal is reached is prudent. No resistance to speak of, supports aplenty. Just hard to short precious here.

Oil $CL_F is selling off in sympathy with SPX futures. 100% correlation continues. Not much to say about it other than to stay short while no deal. If SPX decides to dive some more, oil will follow without any hesitation. $95 is going to be the target.

Conclusion: markets are hostage to deal negotiations. Washington rules the day. Can they screw up the trade? They created it and they will end it, I am sure. Be ready to cover fast and go long if the deal is broad and addresses the debt situation. If the deal is a mere debt ceiling extension - rating agencies and markets will not like it, but even after that, stabilization will come. Simply put, do not expect the end of the world, scale out your shorts wisely and take what market is giving you.
Meanwhile, we thank the trading gods for this opportunity to make some money.

Friday, July 22, 2011

S&P $SPX new levels on the downside

Let's update SPX levels, just in case we have Financial Armageddon next week.
Read my previous post about how to approach this event, as the latest breaking developments are going to put extra pressure on markets starting on Monday. Perception of no debt deal will give us an opportunity to trade a big SPX range. Use the following levels to trade against, whether short or looking to get long.

Levels as of close of trading on Fri. July 22:

1. 50 dsma @ 1311
2. Double Inverted H+S shoulder bottoms @ 1295 (huge pivot level for 2011)
3. 200 dsma @ 1281
4. Flat on the year @ 1257
5. 50 wsma @ 1255
6. Year low @ 1249
7. Support from 2010 former resistance @ 1220 - 1230 
8. 200 wema and trendline support from July low of 2009 @ 1187
9. 200 wsma @ 1161
10. Support from 2010 former resistance @ 1130
11. I do not think we get below 1130 :)

That is it folks. I hope this helps.

UPDATE July 27 @ 1:25 pm edt
1st target @ 1311 was reached at 10:30 am, SPX backtesting it as I type for possible double bottom intra-day.

Update July 29 @ 12:00 pm edt
2nd and 3rd targets @ 1295 and 1282 were reached at 9:46 am, SPX is going to backtest 50 dsma on possible debt ceiling resolution. An opportunity for yet another short, imho.

Update Aug 2 @ 8:20 pm edt
4th and 5th targets @ 1257 and 1255 were reached at close today. Very oversold condition has now developed. 200 dsma is now a formidable resistance on the upside.

Update Aug 3 @ 4:15 pm edt
6th target @ 1249 reached today

Update Aug 4 @ 4:15 pm edt
7th target @ 1220 - 1230 zone reached today, and a vacuum zone below really got sucked out down to 1200 on the close. WOW!

Update Aug 5 @ 10:55 am edt
8th target @ 1187 was reached and is the low of the day so far. Power of charts!
1 pm edt Just came within 7 points from target #9 @ 1161. The word "oversold" does not apply any more, this is a multi-day "crash" by all terms. One for the history books for sure.

Update Aug 8
10th target was met today. All targets have been hit. We are in a new bear market. 

No US Debt Deal = Opportunity (update with new SPX downside levels)

OK folks, here we go!!! We will get a small deal, which will solve no debt problem at all, just an extension. But there will be no end of the world - there will be a deal.
I sure hope you have your powder dry and ready to go. This opportunity will be quick and you have to act decisively.
Here is how it will go: Rating agencies will rule on Monday. It will start and end with the bond market. Watch a massive confusion by all those who are allowed to hold AAA rated gov't securities only, money market funds come to mind, etc. Stock market will dive like nuts. Beware of those sharp declines and use them to buy the market A LOT LOWER. Be short until then, and trail your stops because the snapback will be just as quick and violent.
NDX broke out to new year high today. No need to short the leaders, just short the laggards. Strategize over the weekend, use extreme caution, put silly bids in, and wait for the market to come down to them. Then buy all the leaders in your sight. It will be an unprecedented opportunity to buy a 13.5 PE multiple SPX @ perhaps 11.5?? Do not listen to all those who said it is all priced in and they are ready for a smaller deal - just not true. Big deal was priced in - not a small, extension-type deal. Fear makes people rethink everything in a blink of an eye. All those fund managers sitting on gains will sell so fast, it will make everyone's head spin.
It will look bad in a short-term, but manageable at the end. There will be a deal by Aug 2, and until then we get a lifetime opportunity to trade two ways in a very wide range - 200 SPX points perhaps. Yum!!! Use my levels on the downside for your references, if you wish
If you are afraid, not a trader, do not have live quotes at your disposal all the time, not sure, or just plain out new at this - DO NOT DO THIS! Be safe and follow your plan.

$NDX Nasdaq 100 Futures $NQ

NDX decided that there is no need to wait for SPX and DJX to make a new year high. Blowing all the stops and shorts are scrambling to cover. I have no idea if this was on the heels of all the good news from tech sector's Q2 reports, or simply the fact that tech leads all advances in the market lately. Leaders lead!
Above 2419 NDX high there is no resistance to speak of. Nasdaq 100 has not been at this level for over 10 yrs. You wanna pull a monthly chart up and draw some lines across 2000 and before? Be my guest... You could start putting some Fibonacci extensions on this move, but it is less likely that fibs will apply here. Another target could be the top of the channel from 2009 low. This would take us to 2650 or so before year end - another 9% up from here or 230 points. That also coincides with a box extension play. We were in a 230 point box from 2188 to 2418, and just broke it.
This train ain't gonna stop any time soon unless SPX and DJX derail it. It is in full steam mode. Do not fight this folks. Should SPX and DJX roll over, then all of this bet is off. Highly unlikely though, as the earnings are coming in very good, to say the least.
SPX and DJX are balking as I type, as NDX is pushing higher deliriously, and showing no refrain.
If SPX does not confirm NDX breakout, will this be concidered as a fake?? Only time will show...

$SPX Futures $ES, Gold $GC, Oil $CL Technicals

SPX futures ($ES) daily pivot and 15min200 laminate is holding the price up here. Channel from 1291 low has developed. If current level breaks there is some support in 1330 - 1327 area. Lower high below 1354 will be viewed negatively, should the market not take it out soon and further break below 1327 support, so then we may have a symmetrical triangle forming between 1257 and 1354. Symmetricals are great range trading patterns, but are not good for breakouts, as they do not give you any direction hint; they are also the biggest fakes. Let's see what transpires.

Based on no debt deal, Gold ($GC) decided that it has seen enough of a sell-off and now is up on the day, just in case the wheels fall off the wagon over the weekend. Erratic gold pattern here, consolidation in 30 point range. My view it is going lower after this consolidation.

Same range trading goes for Oil ($CL). No progress on break out of 95 - 100 range. It is hostage here, due to rangebound equities.

Mr. Boehner & Co. just came on TV and chastised Mr. Reid & Co. These guys are the best actors to walk the face of the earth. This is not good for risk and will produce a mild risk off today.
Mr. Market is tired and will probably meander for the rest of the day. No real catalyst for anything.

Econodata - China Slowdown

I am still thinking about that weak Chinese Mfg PMI released yesterday. Is the market so focused on resolution of debt issues that it completely missed the weakness in China? Or is the market happy about the end of Chinese rate hikes, due to slowdown? Or is there not enough data to conclude the view? Well, we now have two back-to-back declining PMIs, with last one below 50 (expansion/contraction pivot).

CAT reported this morning. Management said that they see "softening of growth in China".

Too early to worry about it? Perhaps... But keep your eyes on Chinese data in the next few weeks to see if the trend develops. Huge economy with even larger world implications. We all greatly depend on the health of Big Panda.

Thursday, July 21, 2011

US Debt Deal Or No Deal - Stock Market Outlook

Market is having a Howie Mandel moment. This Deal Or No Deal game is getting a bit old. I was never a big fan of the original show, as it lacks substance and real meaning. But one stunning similarity can be drawn between it and debt negotiations deal - gambling. You just never know what is in the case. Market is gambling on the assumption there will be a deal. Some traders are anticipating a deal this weekend. Folks, I will say it again - there will be a deal before Aug 2, the question is what kind of deal? The deal is already priced in the market, why do you think we are only 25 SPX points off the year high? If the market was worried about no deal we would be way below 1300 and perhaps even below 1200 now. Words like Armageddon and Calamity have been used to describe the situation, yet the market is ignorant and complacent at the moment.
I never doubted the deal, I just want to see it already - the devil is in the details. I think that Moody's, S&P, and Fitch will chart the way stock market goes, based on those details.

This was just reported across the wires
Stock Futures did not even blink...

Gold $GC - Is the top in?

Many have been asking this question on the way to $1600. It depends on your time frame I say. In the long run probably not. But in the short term it looks like GC has found resistance @ 1600 and may be ready to cool for a while. Look for some choppy and unpredictable pattern trading at first, but then a pullback to major moving averages. No close below daily 8ema for 12 sessions in a row. Should it go, 21ema @ 1560 along with prior resistance-now-support from 6/22/2011 high would be a nice target. So you got 2/3 risk reward ratio here. Ain't for the most conservative trader, but not bad for aggressive ones. Good luck!

$SPX Futures $ES Last Update

Longs bought weekly pivot. Classic buy the pullback trade. I am not sure how long this lasts. No debt deal in US weighs on equities I say. We wait, and wait, and wait...
My first impression is to sell the test of 1350 SPX cash. But at the same time if the deal is reached, that trade would be nullified. Trail your stops and let the scaleouts take care of the rest. If you got a runner, let it ride. You just never know...

LOL, I take my fingers off the keyboard, Boehner goes on TV and says "the ball is in the President's court". Since neither Boehner nor Obama play tennis, I imagine the only game Boehner can be referring to is basketball. Last time I checked NBA was heading into protracted lockout, and I can hardly imagine Boehner wanting to play basketball, with his height disadvantage. What Boehner should have said is "it's Tee Time, Mr. President". The two should play another round of golf (they just played a game not long ago, if memory serves me correctly) and whoever wins gets to decide what deal it will be. C'mon boys, entire world would be watching. Forget about Tiger!! This would be the most televised event of human history, and Mr. Obama loves to be on TV. Let's do it like in old times - DUEL.

Update on Update
Rumor of the deal is pushing SPX to the high. Did they play the game already? That was fast, must be a short course. Anyway, rush, rush to the deadline, better be a comprehensive approach and good cuts with broad deficit reductions. Or else... Debt rating agencies are in a downgrade mood lately, no matter what side of the pond...
I do not like rumors, stay tuned and believe NOBODY but yourself...

Yet Another Update
Has been a "newsy" day from the get-go. Headlines rolling across the wires that no deal on US debt should be expected until next week. Risk Off Friday?? I bet, but I have my own views tucked away, and will listen to Mr. Market... 

Oil $CL July 21

IEA says NO to another release. Wise, for a change... Says prior release is still in the market. Oh really? We took care of that in 3 days, my SUV alone did one day's worth, LOL.
So oil is at the top of its range, knocking on $100. Funny how equities are at the top of their range as well, surprise, surprise. SPX needs to go through 1350 and stay there for oil to follow it above $100. Simple correlation, simple trade...

EUR/USD July 21

Back into daily triangle we came. Above 50 and 100 dsma for the 1st time in 12 sessions. Deal on the European side of the pond is giving Euro the boost, with no agreement on this side.
I am not sure how long this lasts. But take it for now and do not fight. If gold is any indication, this move in EUR/USD may last for a while. Buoyant mood in equities, which are in a multiple personality disorder day as I type (making 3 turnarounds today), may support Euro as well.
Looks like a few days default is discussed within the debt deal. Financial engineering at its best??
I do not care what they do over there, I just want to be on the right side when market moves. Upper trendline of triangle is being fought as I type. All I can say is WOW.

Euro Zone debt deal details out?

How many turnarounds can one day have? I bet this is not the last one. We are now up and running with rumor to cancel the previous rumor about selective default. Looks like existing maturities extended and rates on new loans lowered. Still no official release yet.

Gold down as no need to worry about default...

Equities and Euro up...

I need a break, and US session is just starting :)

Euro Zone Debt Update and Econodata

So you wanna trade for a living?
Another 180 degree turn in European session. The deal stinks so far. Selective default is the word. No official release just yet, but market is shooting first and asking questions later. My guess the traders are realizing ECB is going to hell in a handbasket holding bonds which will never get repaid. Greece first and other PIGS later. Not good...

To exacerbate the euro's pain further, Euro Zone, German, and French PMIs cratered. We have a full-fledged slowdown in manufacturing and services sectors. Folks my next paragraph is even more important.

Chinese PMI has come in below 50 overnight. NOT GOOD!
This is a hit below the belt for those who's whole investing premise was: "Chinese growth will offset world economic weakness". Not any more...
Watch for a heavy session in US on the back of this very bleak manufacturing news from the fastest-growing economy in the world.

European Debt Deal?

There is a deal in the works in EZ. No details are available yet, but as Asia was opening the rumor and later the confirmation hit. I am not sure how to react, since I saw nothing concrete. My guess they paint a picture with a 4" brush.

Gold is holding up here. Clearly, some participants may be skeptical about today's EZ debt solution. GC should sell off by a lot, if traders decide the deal is credible. We will see...

Stock futures were weak right after reports from INTC, QCOM, and EBAY. It looked like a case of buy the rumor sell the news, as all 3 reported very nice results.
But as soon as the European deal news came out, futures totally reversed and are now positive. It is hard to trade in environment like this. Keep your size smaller due to "newsy" nature of trading...

Wednesday, July 20, 2011

$ES $NQ $YM $CL $GC Forex

Stock futures are in consolidation mode after a huge move yesterday. 4th 8ema is serving as a support at the moment. Bulls are looking to buy the pullback to daily and weekly pivots. Bears are licking wounds. We are still within a well-defined range: 1300 - 1350 on SPX. Sell the rips and buy the dips until further notice.

Oil is bouncing inside its own range $95 - $100. I do not see anything to propell it higher unless equities take out their range. Neither will it crater due to surprise draws in inventories. We just had another surprise draw, reported moments ago.

Gold is meandering after a vicious 30 point pullback. Late longs have been burned, again! I do not see another big decline unless US and EZ debts get resolved. It will consolidate here in a choppy mode, I think...

Forex: dollar is down across the board due to no debt deal in congress. We get another few days of this cat and mouse game, and equities will start a sell-off into the weekend. Lets get it done, guys and gals on the hill.
We also got less than expected housing #. Do not look for a market defining moment there for now. Only a trend up will get traders excited, and more subdued numbers will not matter, as it is already well-discounted...

Tuesday, July 19, 2011

Stock Market Update

Things are happening fast. US debt deal, possible European solution, better earnings across the board - all news flow has reversed towards the positive. If your head is spinning around take a deep breath. Mr. Market decided that it is Risk On for now. Remember I said changing your mind (sometimes even twice a day) is what successful traders do?

All US stock indices are above 50 dsma and closing on high of the day. Apple is going to tell us where we go afterhours. If IBM is any hint, we are going to fly on better than expected earnings. Yours truly does not like to chase though - take some profits and trail the stops on the rest, if long. If not, wait for a pullback, one comes all the time. If AAPL messes up - we get a pullback for sure.

Sell some gold here and above. Looks less like Armageddon now. Perhaps we live for a while longer...

Dollar to be strong if debt deal is reached. If we get better existing home sales tomorrow (on top of today's better starts), buck is gonna get some more wind at its back.

Oil is a risk on play. It looks like double top completed with a hold of prior low, and we have a double bottom forming against it. Are you confused yet??

Afterhours UPDATE

AAPL: blew passed expectations. Very solid report. NQ is in heaven - AAPL is 12% of NDX.

US debt: looks like Boehner & Co. may not be giving the blessing to the latest proposal. Stay tuned...

Another Update
Mr. Cantor is warming up to latest "gang of six" plan. Still no blessing from Mr. Boehner, but a progress nonetheless. With everyone on board it creates a huge relief for market.
Also Mrs. Merkel is downplaying the significance of Thursday EZ meeting, with too many (six currently) plans in the works. So if US gets the deal and no deal in Europe Euro will dive. Stay tuned...

Gold Update

Down 25 bucks off the top now. Longs are bailing fast. It always ends in tears for the ones late to the party. We have a well-defined trade here. Watch for US debt deal and Europe resolution on Thursday. Enjoy the ride...

SPX NDX DJX Futures Update

We have a falling wedge breakout (did not take long). IBM earnings are propelling NQ through weekly pivot, ES and YM are lagging a bit, but following. Leaders lead! AAPL earnings tonight. Better be good...

Housing starts are much better. I have 4 new homes being built in my neighborhood. Why? As traders we have to be aware of every little detail around us. Things do not just happen for no reason. If you want to be successful in this profession learn the business cycle, stock market cycle follows it. Stock market consists of multiple businesses with all of their little nuances. Different sectors lead at different times. You need to know the seasonalities as well. You think trading is just charts? For successful traders NO. For fly-by-night "me too" folks, who think trading is a hit-and-run casino-like profession, charts will be enough. Charts work until they don't. Just remember: at the bottom if the ocean, on every ship which sunk, inside captain's cabin there is a chart...

Monday, July 18, 2011

ES, NQ, YM Futures Falling Wedge

By now you probably figured that I like falling wedge trade. It is a bullish reversal pattern. I like to wait for a breakout and buy a pullback to backtest of the wedge. ES, NQ, and YM are in this formation now. Obviously, falling may continue further, but eventually we will get a break. Shorts are to be trailing their stops just above resistance, and longs are to wait for those stops to be hunted, and pullback to be bought. Simple, easy, very rewarding with manageable stops. Be ready...

Financial Market Update

It is risk off in financial markets today. It is not surprising, as US debt ceiling news over the weekend displayed how unorganized is the approach to this most important issue of the year (and I am not exaggerating here). It will be a domino affect if not resolved, quick and painful decline in bonds, stocks, commodities, risk currencies, and a total havoc will set in the markets. If you think this will be allowed, you are to write a Stephen King-like novel fast and sell it before August 2. Just ain't gonna happen folks. Constituents are calling their congressmen as I type and are telling them that whatever that 3rd party forms after no deal by August 2 and US debt default, they will vote for it. All Mr. Obama had to say was that SS checks will not be printed comes Aug 2. Phone lines in Capitol lit up like crazy...

Let's look at technicals. Stock indices are testing last week's lows as I type. Both SPX (below 50 dsma now) and Dow futures broke marginally below July 12 low, but NDX futures are still holding July 14 low thanks to AAPL and GOOG. Financials are leading the decline (understandably so), they will be the hardest hit should US or Europe decide Armageddon is the path of the future.

Oil is not playing around either and is heading for last week's low test. If no hold there, double top folks will scream louder in NYMEX pit.

Gold is in heaven and running all the stops above 1600. Do not short it please, wait for a top to develop. Once it does we will have 20-30 point slide, to punish "Johnny-come-latelies". Continue trailing your stops, longs. Uninterrupted 130 point ride from 100 dsma continues.

Forex risk currencies are in a dumpster against USD, JPY, and CHF.

Follow developments out of Washington and Europe closely. Should those issues be resolved and earnings not disappoint - we will have a rally to remember. In the meantime trailing stops for shorts is the plan.

Watch IBM earnings report after the bell. Crucial news for the leading market segment - technology.

Sunday, July 17, 2011

Stock Market View for Week of 7/18/2011

It is going to be an interesting week. We will have a lot of trading opportunities related to news: from debt ceiling negotiations, to economic data, to earnings reports. Let's look at them in detail.

Debt ceiling: Mr. Obama and lawmakers duke it out in a nail-biter. I already said this is to weigh on equities in July, until resolved. Believe me folks, it gets resolved, but we get a heck of an opportunity to buy a crater-of-a-day or two before it does. Be ready...

Economic data: we are getting bad mfg data again. Empire State came in weak, so did industrial production. We will have mfg data from around the world to digest this coming week. If this weakness persists, markets will get worried about 2nd half again. We also will get housing data, it needs to show improving trend, as the last month's reports were positive. What a booster it will be, IF that trend develops...

Earnings reports: had it not been for debt ceiling, market would be higher by a lot. Earnings last week came in better than expected. AA, JPM, and GOOG showed that corporations are finding ways to grow both top and bottom lines. We will have a bunch of reports next week, with IBM and AAPL being the most important. They are at historic highs, and are the backbone of the market leading segment.

Conclusion: plenty of stuff next week to make us some money. But we need to weigh it all together when making the decision which way to go. Not going to be easy at all. Good luck!

Thursday, July 14, 2011

Oil $CL - Double Top

We have a confirmation. Inability to pierce through July 7th high for the 2nd day in a row. Traders love double tops - clear chart formation, well-defined risk for placing stops, multiple targets on the downside. Chart formation now looks similar to June 10th.
It is falling like a rock now. Everyone is piling on this trade as I type. Being early is the key. I hope my yesterday's Oil post helped you...

Stock Futures Update

As I suspected, we had a retest of lows of the week (with help of Moody's). Bouncing higher as I type and perhaps we start the frantic end of OPEX week. This is the time when option traders teach futures traders how to inflict the maximum pain on the one trading against you. I respect option traders for the hard work they do, as there is so much more to option trading (greeks, etc.) than futures. I like to sit back, if have position on, and not initiate any new ones passed Wed night on OPEX week. Look for 1300 to 1350 range to be played in SPX. A lot of commotion will happen in this congested zone.


Folks, it is getting ugly. At 5 pm Moody's found out that Obama walked out of the debt negotiation meeting and decided that is all they needed to put US debt on review for downgrade. 5 pm is the least liquid time for Forex. Yours truly witnessed the outcome as it happened. No harm done, I had no positions on. But if one wanted to trade, it was impossible to get filled at a good price, or do anything that made any sense. So the conclusion is if you do not lose any money by not having positions on, you in fact made money by saving and preserving it. I already said in my earlier posts, traders do not trade all the time, but only when there is a trade. Stay flat in uncertainties, stay flat when stuff makes no sense, stay flat when you can't be at your screen to react or make an educated decision. Stay flat and safe, RISK OFF.
CHF, Gold and JPY - the usual risk off beneficiaries are getting a bid. Something is just not right though, USD and Treasuries are supposed to get a bid during risk off as well. But with downgrade looming, USD and Treasuries are going to get sold off, artificially propping up Euro, Cable, Loonie, Ozz, and Kiwi which all usually get sold off during risk off times. We are going to get some moves that make no sense. Will you know what to do? If the answer is NO, then stay flat. Should you decide to trade, you should risk a very small portion of your acc to trade in times like these, meaning your position size will be a fraction of your usual one. Tight stops and limit only orders are a must. Fast execution trading platform, multiple accounts for backup, with extra funds for higher margins, which get raised during volatile times, are a must as well.
That said, all this risk off will create some outstanding bargains. Be prepared, "black swan" - end of the financial world perception opportunity comes very seldom. Short the heck out of it when it goes down, and buy it back on the cheap once it bottoms. I can smell it coming, I am salivating!

Wednesday, July 13, 2011

Oil - $CL

Quick observation. Bounced off 61.8% yesterday, and smartly up today on better than expected EIA report and more importantly QE3 hint. BUT, it better go through July 7th high fast, or many short-term players will be calling for double top. Run, Forest, run!

Bernanke - Economy

So Mr. Bernanke is confirming what we have worried about - 2nd half of 2011 has some risks of being slower than expected. FED Chairman is hedging his earlier view of US economy with "maybe more stimulus is needed" words. Market loves it at the moment. Dollar is thrown under the bus and all risk is bought.
I just have one question - did Helicopter Ben just give the market a candy, or as I sad yesterday a pacifier? Crying baby will calm down, but after this candy is gone (2-3 days), what we will really have is "maybe" out of that phrase. There will be lag between end of QE2 and decision to continue QELite. I am thinking that we sell off after this initial reaction, as big money realizes that earnings have to be revised and price targets lowered, and perhaps by a wide margin on some high flyers.

Euro & Gold update

EUR/USD news flow is crazy. Enough headlines from both sides of he pond to make this pair most favorite trading vehicle in FX land. I am not going to get into all the details, we discussed them here at length over the last week...
Technicals: 200 dsma was support with violent bottom, they always are. Shorts had to cover and new aggressive longs are in. Daily triangle's bottom will be the resistance for now. New range here?? We'll see...

Gold: new historic high today - surprise, surprise. :)
Those still holding need to trail tight stops and be ready for some profit taking here. Gold likes to go to new high and then punish the complacent ones with $20-30 pullbacks.

Mr. Bernanke testifies @ 10 EDT. Let's see what he says about all of the things driving EUR/USD and Gold.

Tuesday, July 12, 2011

FOMC - QE3 Discussion

Discussion is what FOMC has around the table comes meeting and rate decision time. So they discussed QE3 and documented in FOMC minutes. That's all market needed - pacifier for crying baby. Gold is skyrocketing, oil and other commods as well, equities picking up too. I have already said here before: QELite is the name of QE3, or whatever you want to call the easing campaign's next phase. Not sure what new info market sees here, but we take it and run with it...

Overnight Armageddon showed its ugly head, US session is laughing about it right now. Not sure we are out of the woods just yet. Perhaps we retest that o/n 1295 low on ESU1 and bounce for OPEX end of the week fireworks. You just never know what OPEX brings, and I am not kidding here. Toss a coin...

SOX NDX Divergence - Confirmed

I blogged about SOX NDX divergence last week We now have confirmation and a pretty good understanding why NDX can't get going. SOX to NDX is like DTX to DJX. It is a very important and vital component of tech without which the recovery can not be confirmed. Chips are in all tech products. Last night and this morning we got weak guidance by chip equipment companies, and an earnings preannouncement by another chip co. Funny enough, yesterday we had one analyst upgrade the group. Folks, this just tells you that those clowns are not to be listened to...

So let's revisit the technicals: Cup and handle formation and 403 support are gone. It is heading for the lows of the year. In a very bearish development - 50 dsma is threatening to cross below 200 dsma, thus creating a "death cross". Watch out longs!!

Monday, July 11, 2011

10 Yr Note Yield $TNX

No change from my Friday update, continuing to crater. We are below 3% and settled at the low of the day low. 10 Yr Note is the safest after German Bund. I have to say, if European contagion is really here to stay, I doubt Bund has upper hand, our treasuries will win the competition and really skyrocket. Many will say "skyrocket where? highest levels in a long time already". I say fear can drive treasuries to 2.5% yield before end of July. Well, just one trader's opinion. And I reserve the right to change my view... :)
I am sure you have your own thoughts on this.

Technicals: since a daily close below 3% occurred, we have 2.8% and 2.7% to trade against below. After that 2.5% is near, and unthinkable 2.3% after that... Can this happen? YES, especially if equities disappoint with Q2 reports.

Q2 Earnings - Watch the Guidance

We are going to have a pretty good example on how the market reacts to earnings reports this week. One very important note: companies will perhaps report well, but it is their guidance we are to watch closely. If guidance is weak down we go a lot I say. 2nd half recovery and better growth would be in question, so will the S&P earnings per share and price target based on that. I am not panicking, I am strategizing. Fools never change their mind and grind their accounts to $0. Smart traders change their mind all the time, ALL THE TIME. Nothing is wrong about changing your mind with data changing as fast as it does now. If you are not used to changing your mind - please do not trade. Just don't! Leave your opinion and bias behind before arriving at your desk and turning on the computer. You will thank me later...
Read my SPX levels on the downside if you are short and looking for targets to lean against, in case double top / head and shoulders in SPX is being played out here

$ES update

As I mentioned overnight, if YL goes by 5-6 points 1313 is next, We are here, lets see what transpires. A lot of support here, if goes through easily, we have a 1300 and 1293 targets. Absolutely no reason to think one or the other just yet, not enough data, but if you trade the plan you know your entries, targets, and stops... Good luck!


Today is the day when "traders sell the screens", meaning whatever they see when they come in the office they sell. Except for Gold, US Dollar and treasuries, everything else is down. All news flow over the weekend was negative: from Greece to Italy in 60 seconds, to Chinese inflation at 7% and not showing any cooling, to no US debt deal (surprise, surprise), to NY Times about tough Qtr for banks. RISK OFF day is here...
That said one can't panic, one to remain calm and collective, to follow the plan, and look for opportunities.

Euro: Speaking of panic. All officials' comments over the weekend and this morning are a full-fledged panic mode. From emergency meeting, to German Fin Minister's comments, to Mrs. Merkel's "euro is safe at any cost". Any cost?? Whatever it takes?? And Greece will get another package?? And crap hits the fan fast in financial world... Italy is the worry folks, do not make mistake about it, we got a problem no country except US and China can deal with there. Not a chance though, we and China have our own fires to put out... Rome is burning!!!
Technicals: sliced through bottom of triangle by 100 pips. Nobody cares about any support here, longs are bailing and shorts are pressing further. WS2 @ 1.4010 is near, hedge funds like those extremes to fish for reversals, but maybe not today. If you are long - you are in despair, if you are short - your euro disintegration dream is here, and you are fully in charge. 200 dema and dsma are your targets and you are simply trailing your stops, and wisely scaling out I hope. No credible pullbacks for new shorts, except if you are an intra-day scalper.

SPX futures: Houston we have a problem. Below YL, sliced through WS1, below 8 dema, and heading for 21 dema, 50/100 dsma, and WS2 laminate as I type. Same scenario, lucky shorts are trailing the stops, could be a trend day, again with very shallow pullbacks for new shorts to be initiated. The only reason we get a rally and pull out of the gutter would be the start of earnings season tonight with AA report after the bell. That said, world-wide financial Armageddon is in the back of traders' minds, just say Lehman a few times in a row, you will panic instantaneously.

Oil: bounced off support around 94.55 50% fib, and consolidating just after NYMEX pit open. Hourly bottoming formation maybe a help for some stabilization, but should the equities continue to fall, it will follow.

Gold: glorious rise without pullbacks continues. 1559 is a few points away, 1577 is next. It is trucking and running on all cylinders, and ain't stopping here for nothing.

Conclusion: RISK OFF everywhere. But I refuse to panic, and want to look for opportunities. Beware of quick reversals and stay alert to broad European-wide solutions. No need to be a hero though, wait for your signals, whatever they may be. That said , NOT going against the market but with it is more rewarding most of the time. Find the trend and go with it.

Market Update July 11

It is 2 am EDT in US, but markets are open in Asia and getting ready to open in Europe. Traders trade forex 24 hrs and futures almost 24 hrs around the clock. This is one of the biggest benefits of this profession - there is something to trade at almost any time. Should one spend 24 hrs around the clock at their screens? NO. But if you are able to do this 10-12 hrs a day, you can make a comfortable living. Please forget about getting rich quick, the only thing in this profession to do quick is to blow your account.

Euro: shoot first, ask questions later. Traders are selling euro across the board, all euro pairs are down. There is a rumor that emergency meeting scheduled for today will discuss Greek default. Bummer!!! Can someone please tell us something we did not know? I would be more concerned about Italy here. Absolutely no bailout can be done there. Italy defaults - world is going to hell in a handbasket for a few months. We are way too early in Italy yet, but traders will get ready in advance.
EUR/USD Technicals: there is a gap. When price opens below/above prior closing day and moves away further, it is considered a gap. Forex traders like gaps because they usually get filled, if not in the same session, soon after in few days. OK, we are at 1.4200 as I type, lower trendline of daily triangle is @ 1.4160. There is going to be a stop hunt there and possible reversal. Be ready... That said, after that support Euro could be heading for a lower daily BB @ 1.4120 and possibly 1.4102 6/27 low. Stop hunt can be 20-40 pips of very violent quick action. If you blink - you missed... Below we have another support @ 1.4072 6/16 low,  and after that 5/23 low and 200 dema laminate @ 1.3970... At that point we will be way below the daily triangle's lower trendline and will be considered a breakdown. 1.3912 would be a good target to trade against in that scenario, which is 200 dsma. Shorts are all over the euro here. I would short @ gap fill or 10-15 pips below, if not short already. Do not chase... Stops will be placed above 1.4285 and 1.4369...

Oil: breaking down or just a pullback?? Not enough info to decide yet. Just pierced 95.70 as I type. If this area goes we are gonna fall to 94.55 and possibly 93.40 quick. Above the resistance is @ 96.70 and 97.10 Risk off is definitely here, all commodities except gold are under pressure.

Speaking of Gold: precious is trucking with almost no pullbacks (as predicted by yours truly). Absolutely no reason to think it does not try to have a run at highs. 1559 is DR2 and 1580 is WR2. Lets see what happens...

SPX futures: pulled back to 8 dema, surprise surprise. Buyers are lining up, but should the news get worse overnight, it is no sure trade. YL @ 1329.25 to be watched, I am not saying for a breach of a tick or two,  but we take it down below for 5-6 points, shorts will pile on and a trip to 21 dema @ 1313 is in order then, WS2 is there as well... On the way up we got WP @ 1341 as a resistance, and last week high after that @ 1354.50...
Earnings season is here, AA opens the gates tomorrow...

Friday, July 8, 2011

10 Yr Note $TNX Update

It is time to look at what yield is doing after horrible NFP. 10 yr yield is below all daily moving averages, and 50 dsma crossed below 200 dsma - "death cross". No, nobody died, but when this happens it usually means more weakness ahead. Daily huge engulfing candle has swallowed 6 days of gains. 3% is the magnet, if news gets worse watch out below. Italy is in the mix as well today. Lets see what credit rating agency downgrades it first next week - US treasuries will fly, sending the yield even lower...

Euro update

Things are going to get worse if Mr. Draghi (incoming ECB president) continues this. News wires just carried his comments about currency wars. Is he for real? Chinese prime minister was just in Europe trying to lend them the hand. Do not bite the hand that feeds you, Mr. Draghi!
Euro is getting creamed across the board now. Lets see if M. Draghi backpedals out of his comments, and says that they were taken out of context...

Technicals: we are below 100 dsma now and pecking 1.4220 support as I type, if broken the vacuum below here is 60 pips to the lower trendline of the daily triangle and lower BB @ 1.4160. Daily S2 is there as well. 

Stock Market $SPX Update July 8

Pullback is in full force. It just had to happen. Market always looks for excuses to take profits, none bigger than NFP. Is this the end if rally? Earnings reports next week will tell. If the results are disappointing market will sell off more.

Technicals: we were overbought on SPX. All indicators were scraping the ceiling. There was simply no more room to go up. This said, stochastic is embedded in buy on daily. So this pullback will be met with buying at 8 ema first and 50/100 dsma laminate after that, with 38.2% fib just above that. Be nimble and beware of the Q2 earnings risk.

Thank God for some two-way action and volatility. Speaking of which, OPEX week is next. Look for some pinning and max pain plays. Good luck!

Oil and Gold Update

Oil is selling off in accord with all risky assets this morning. If jobs are weak, oil and gasoline consumption would be weak. Oil has a simple and direct correlation to economy. Trailing stops are being gobbled up here. Longs are bailing. 50 dsma is resistance. Support comes in right here @ 200 dsma and below @ 95.70 38.2% fib.

Gold is rocking. With dollar down across the board gold is now gaining momentum. Italian worries are a big help as well. Precious is the desired asset here with all of its positive underpinnings coming together. Two consecutive closes above 50 dsma occurred (as I discussed before), shorts are bailing. 1559 resistance and high @ 1577 after that. 50 dsma is support.

EUR/USD July 8

Bouncing inside y/day's range. Euro is not sure what to do. On one hand there is a storm brewing in Italy (did not take long, I said after Greece Italy is next). On another hand ugly NFP killed the dollar, because of US yields cratering this morning. QE3 will be the notion of the day (I already said QELite is here to stay).

Technicals: no change since y/day. 1.4400 is the resistance and YL @ 1.4220 is support. Range traders are in charge for now.

Econodata - NFP

Three letters have changed many player's view on markets this morning. The grandfather of all economic reports US Non-Farm Payrolls (NFP) is out and it is ugly. I will not go into all the details, as they are available on government's website. All components were very weak and going the wrong way. I will just say one thing: we now have two back-to-back ugly NFPs, in economics trend is the key.

With that in mind lets look at markets. Risk off is going to dominate the day. Rally in all risk assets will now be interrupted and pullbacks will occur. TRADER HEAVEN is here. Traders do not care which way it goes - they just want to ride the wave. 

Thursday, July 7, 2011

Stock Market Update

NDX is @ new year high. So are many other indexes. DTX and RLX are @ all-time highs. There is a saying: "new highs beget newer highs".
I have nothing against this. But one has to exercise caution ahead of NFP. If it comes in ugly tomorrow, some profit taking will ensue. 2nd Qtr corporate earnings reporting begins next week. We are up 8-10% on indices from the low reached just a week and a half ago. Trees do not grow to the sky. Trail the stops if you are long. Enjoy the ride.

Econodata and Market Update July 7

Asian, Australian, European, Canadian, and US data was very positive today.
I want to concentrate on US. Retail sales were better than expected. ADP was a big positive surprise. Claims slightly lower. This is giving bulls yet another boost, and wind at their back may increase if NFP tomorrow is going to confirm ADP. I have seen on quite many occasions that when ADP is off by a lot, NFP would not confirm. Less than 24 hours to wait...

SPX is @ 1350 and NDX @ 2400, just shows you that market will hurt the most players at most times. Expiration week is coming, will these be the levels pinned? Is this the max pain?

Oil CLQ1 update

API showed bigger draw across entire oil complex: crude, gasoline, distillates were all a big surprise. US had a big driving holiday last week.
Lets revisit the technicals: higher highs, higher lows since break out of the falling wedge. Stay with it until it does not work, trail the stops, scale out at your targets on the way to $100...
EIA report @ 11 am today.

EUR/USD Update

All positive for euro from JCT presser at the moment. Suspension of rating consideration for Portugal, no "selective default" consideration for Greece, inflation expectations elevated, etc. etc...
Longs are going to use today's low for stops and try to hold on for 1.4400 backtest, which we never had.
Shorts will say that ECB will be bankrupt soon due to Greek and now Portugal junk debt tainting their balance sheet. They will use today's high and perhaps 1.4400 as a stop and try to push for lows, and will try to force the test of lower trendline of the daily triangle at 1.4160, if the low of today goes convincingly.

Lets see who wins for the rest of the day...


Getting from bad to worse with downgrades coming in daily. Portugal bank debt today.
Technicals: got to the target I mentioned y/day @ WS1 1.4236 and bouncing as I type.
Lets see what is said @ press conference. Here is the link

Wednesday, July 6, 2011

SOX NDX divergence

Not sure if this will be of any importance just yet. But SOX is in a two day divergence from NDX now. I have a feeling that AAPL, GOOG, AMZN, and PCLN's retail exposure is driving the rally (with XRT @ all-time high), while the cyclical nature of SOX is pulling it down.
Lets look at technicals: SOX is pulling back from hitting a laminate of upper daily BB and resistance at 5/25 - prior support, with falling 50 dsma just above. Price is currently @ 8/21 dema laminate support, and cup & handle chart formation has now developed. Handle usually goes back 50% of fib retrace, which is @ 403; there is also another support there, which was top of engulfing daily on 6/23.
We are to monitor this closely for possible trouble ahead if 403 goes...

Oil CLQ1 update

There was your pullback to above the neckline of inverted head and shoulders. Did you get it??? Short-term moving averages were kind of all laminated there as well. No real change in technical picture from yesterday - breakout on the upside continues. Target is $100 an $101.70 for now. One big thing that may derail this would be API/EIA reports tonight and tomorrow. If huge build is reported due to SPR release, that may portend some short-term weakness, but traders know about this already, pullbacks will be limited, imho. 

Gold GCQ1 update

Precious is on the roll. Portugal downgrade and euro weakness gave it "new reserve currency" status back. It is now above 50 dsma and looks to do some serious damage. There is really no formidable resistance all the way to 1559 an then the high @ 1577. Shorts are wisely covering here. Support will be at 50 dsma and 1512 below that. Wanna buy a pullback? Once GC starts trucking it ain't gonna give you one. Switch to short-term frame and pick a spot. Good luck...

EUR/USD July 6

Longs are bailing here. All Euro crosses are under pressure. Contagion is the word and it is now clear that technicals are ripe for a trade range over the Summer. EUR/USD is hostage here...
Lets look at charts: daily triangle is intact. No sustained breakout above upper trendline, with daily spinning top two days ago, gave shorts the signal. It is now being supported by 61.8% fib (of 1.4102 - 1.4577), but since it is now below 50 day sma, 100 dsma @ 1.4260 and WS1 @ 1.4236 may become the targets for stops below. 1.4400 (50 dsma and WP) will be resistance above. Funny enough, there is still a rate hike tomorrow (priced in), but more important will be the language @ press conference. Listen to it if you can! I will post a link here as soon as I have it (shortly before 8:30 am EDT)

SPX July 5 Review

Price closed above daily upper BB for 3 consecutive days. This is only the 3rd time it happened since the rally began in March of 2009. Last 2 times SPX sold off between 2.5 and 4% immediately after. I am not calling for a huge sell-off; 2% would suffice*. 50 day sma is only 1.6% below current price. To aid my theory, today was an inside day with pretty small range. Lets see what happens...

* Shorts have to be quick, decisive, and with tight stops here, uptrend is intact.

Tuesday, July 5, 2011

EUR/USD update

Well, euro showed us that it is only one sovereign debt downgrade away from a train wreck. Portugal is in the mix in the last 45 minutes. As I mentioned before support comes in @ 1.4400 level, with 50 day sma, weekly pivot, and 50% fib around there as well. This level has to hold for longs to feel in control. Stop hunt is probably the game plan for Asia session, as Europe is closed and US is winding down. Longs will try to hold on but should news flow deteriorate, watch out below. Still rate hike coming on Thursday, balanced act here, not a one-way down, imho...

Oil and Gold update

Oil broke out of falling wedge I discussed in my post last week Price has sliced through 200 day sma and is fighting 200 day ema, which is also in 50-61.8% fib zone. Traders are going to be on a lookout for a trip to $100 on WTI CLQ1 (yours truly included), which is around 50/150 day sma laminate. Trailing stops are going to be placed below $94.34 and $93.45 There is an inverted head and shoulders on 4 hr with neck @ 95.70 resulting in $6 distance. That implies a target of $101.70 or so, which is also upper bollinger band on daily.
If you missed the move wait for a pullback and trade your plan

Gold is acting strong after hitting 100 day sma support last week. Above 1514.80 resistance it has 50 day sma to fight @ 1522 on GCQ1. Daily stoch has crossed into positive and is above the 20 line.
After two consecutive closes above 50 day sma, shorts better beware...

Econodata July 5 and Forex update

New Zealand: Biz Confidence is up strongly. Huge rebuilding efforts (after Christchurch earthquake and aftershocks) are under way. Kiwi (NZD) is at multi-decade high against USD and looks unstoppable. China has a lot to do with this move, as they have announced their intentions to invest NZ$6 billion in New Zealand.

Australia: AIG Svc Indx a bit weaker. Trade balance stronger than expected.
Of very high importance! RBA (Reserve Bank of Australia) left the rates unch @ their meeting last night. Furthermore, they sounded very dovish in their comments downgrading the Australian growth for the rest of the year to less than expected. This pretty much takes care of any hikes in foreseeable future. AUD will probably settle into a range here, due to this development.

Europe: UK Svc PMI in-line. Pound continues in its 1.60 - 1.61 range. This coiled spring will shoot like a rocket once it breaks out. No idea which way yet...
EU final Svc PMI slightly weaker, as well as retail sales. Euro is still under some pressure from S&P comments on "selective default" of Greek bonds. They downgraded Lehman to selective default, as I remember. We know what happened shortly after...

US: factory orders slightly below expectations. USD is getting a bid across the board. Not sure what is the deal, but a few ideas would be: Greek worry due to rating agencies, and rumor of a possible repatriation tax holiday on overseas profits by US corporations. The latter has been in a discussion for a while as a tool to boost domestic investments, by bringing here otherwise dormant funds sheltered overseas. The bill is in congress and perhaps some are speculating on imminent positive outcome. Similar legislation back in 2004 failed to achieve its intended results: job creation. Lets see if law makers attach some stipulations to current bill, which would guarantee job creation by corporations subject to tax holiday.

Trade The Plan

I can not say enough about this rule. This is probably one of the most important aspects of trading, and undoubtedly has contributed to demise of so many traders.
In trading, we are the biggest obstacle to our success. Most of our mistakes come from our inability to follow our rules. I am not saying anything new here that has not been well-documented in trading teaching and mentoring books. Any of them could be a big help and should be read on regular basis. But I will concentrate on just a few details in this post, and try to reflect on our very hard profession.
I would be rich if I had a dollar every time I heard traders say: "I just want to concentrate on my next trade". Of course you do, but have you learned anything from your last one? I bet I would get a quick "yes". Well, then why do you make the same mistakes over and over? In chart analysis I look in the past to predict the future. It is similar in trading. If you can look at your previous trades and learn from your mistakes, you could adjust your trading to avoid the same outcome. Once you do that, you can develop a carefully-designed trading plan, and follow it religiously for your future success. Once you develop the plan, stick with it. Please do not change it, if it brings you success. It is ok to change some details and adopt to different trading conditions. But do not scrap your plan altogether because you heard about some new best thing since sliced bread, or found a "holy grail" indicator. We doubt ourselves too much with questions on when to trade, why we are in the trade and when to get out while in the trade, and when to get back in. If you have a plan written down you would know, just refer to your notes, read over them daily if needed, and follow them all the time. This is a simple formula for survival in this profession. Yes, you heard me right - survival. Only 5% of all traders make consistent profits (well-documented fact). The other 95% either break even or lose on consistent basis, with many dropping out due to blowing their accounts. With such startling statistic, it is understandable why our profession is one of the hardest of all. Odds are stacked against us before we even begin.
Some folks say that trading is gambling and it is not a profession. Everyone is entitled to their opinion. You know what I think. I am still here, still trading, still surviving, just following my plan...

Monday, July 4, 2011

Happy Independence Day to US Traders

This would be the perfect time to discuss US debt. While this is the country which is known for its strive for independence, one can not deny that US depends on outside creditors for its debt. China and Japan are the largest holders of our government debt; other sovereigns have been investors in our treasuries as well. It is widely known that Big Panda has been diversifying its foreign reserves out of US dollar and debt into other assets around the world*. Japan has been concentrating its reserves on  endless domestic problems: fight with deflation and lack of growth, as well as  post-earthquake recovery efforts. Many of the sovereigns have been pulling back from our treasuries for various reasons. So who has been buying all of our debt? FED. It is now the largest holder of our govt debt through purchases in QE1 and QE2. Speaking of QE2, while it just ended, FED will still reinvest the interest on treasuries that it accumulated. So all those who think it is over - it ain't. QELite is here to stay for a while. Mr. Bernanke said at least 2-3 FOMC meetings will pass before the end of the easing campaign. FED's balance sheet has swelled by $3 trillion, a lot of interest is paid on that principal (perhaps as much as $200-300B in the next 12 mo).  Many have been saying (and have been wrong for a while) that treasuries are the next bubble to burst. This notion has been keeping bond funds like PIMCO on sidelines lately, further reducing the pool of available treasury purchasers. To throw a monkey wrench into all of this, our government has decided to have a stalemate debate this coming week about raising the debt ceiling. Except for Domino's working overtime to deliver pizza to hungry politicians, as they work into the wee hours of the night to get this done quickly and go on canceled Summer recess, I see no point in all of this. Congress has been very ineffective this year, and I would not be surprised when the news about the lack of progress on this issue will weigh on equities in July.
So why all the details about US debt here? As a trader I have to be aware of major catalysts which could create the opportunity of a lifetime. How many times have we had our debt ceiling reached? I am preparing myself for a possible ugly day or a week in equities in July or August, when the debt ceiling is not raised and US default is imminent. Do I think the default will happen? NO. Mr. Geithner will look around inside of his Treasury murse and find as many Benjamins as needed to keep us afloat until debt ceiling is raised (poor man will be so exhausted by then, "he finds his job too taxing" and he will be leaving, that had to be the funniest thing I have heard about him). But perception is the reality now in the trading world. Let's see if we can have another Dow 777 point decline, like we had after failed TARP passage on first attempt. Politicians got the message and passed it days later, when they realized their constituents just lost that much of their net worth, as more than half of Americans own stocks in their retirement portfolios. Opportunistic traders were ready back then and picked up the equities on the low from fearful. My SPX levels on the downside will come handy should the debt ceiling debacle happen. Be ready, plan ahead, and stick to your plan. (more on trading the plan in my next post)

* In late breaking developments China has been identified to be misleading US on its debt purchases. I remember Rick Santelli from CNBC screaming about huge increase in direct bidder percentage at auctions, and asking where the heck was all of this coming from. Well, we get our answer now

Econodata July 4

US is closed for Independence Day (my next post on this), but Australia, Europe, and Canada have produced slightly better to in-line to very weak econo numbers. Lets look at details:

Australia: Retail Sales weaker than expected. Building Approvals had a 7% miss on expectations. Australia's housing boom might be hitting a snag...

Europe: Swiss retail sales cratered. 8% miss due to lower food turnover. What, nobody eats Swiss cheese any more?
UK construction PMI in-line.
EU: Sentix Index way better - investors are optimistic. PPI -0.2%, not going to stop vigilant Trichet. Spanish jobless down 1.62%, not bad, they need more jobs fast.

Canada: RBC June Mfg PMI slowed from May. Both RMPI and IPPI lower than expected (they needed inflation to cool off). Did a little bird whisper some early numbers into Mr. Carney's ear a week and a half ago? His dovish comments make sense now...

Quick thought: with more than half of S&P earnings growth coming from overseas, we need to watch these numbers very closely.  

EUR/USD July 4

We now have two consecutive closes above 1.4500 on daily to confirm the trip to 1.4700

Longs have Thursday ECB meeting on their side. It is widely expected that 0.25% hike will be announced then. We should also pay attention to JCT (Jean-Claude Trichet) press conference that day. Look for hawkish tone to continue. Be on the lookout for "strong vigilance" phrase, or something along the lines of "no change in our outlook". Just remember: ECB is a one-mandate central bank, with emphasis on below 2% inflation target. Last report showed annual inflation running @ 2.7% in EU, and not showing any signs of cooling off.

Shorts have a possible Greek debt default declaration by rating agencies, due to existing debt-swap/rollover proposals. This is also an issue for ECB, which said they will not accept Greek debt as a collateral in event of default. It could create one ugly headwind for Euro, as Greece's banks will be cut off from funding. If this happens markets will be roiled, to say the least. Not everything is perfect in our little paradise.

Longs are winning so far...

Friday, July 1, 2011

SPX update

S&P bulls are chasing all bears out of town. Lets look at technicals on Sep futures contract:  price is now outside of bollinger band on 1hr , 4hr, and daily - gasping for some air here. Like I said before, on days like these nobody cares. Short-term intraday traders are trailing 8 ema on 15 min and enjoying the ride. Let them ride folks, do not be in front of this train please! If one is lucky to be long here, possible resistance may come @ 1342.50 June 1st high and @ 1352.75 May 11 high. After that I see nothing else in the way above to the year high @ 1367.50 and beyond. On the downside 50/100 day sma will be looked at as a respectable support. All the memories about Greece erased, and greed has clearly taken over here. Fools rush in!! If you wanna get long - wait for a pullback.

Closed on the high of the day. You had to respect this if you were short. Established a higher low at 1258 on SPX cash - above the previous low 1249 earlier in the year. Now it is above 50 and 100 day sma and bulls are charging. My only question here is everyone positioned the same way now - long? I said at the beginning of the week that many traders wanting the same thing results in the opposite outcome. I am going to monitor the charts and sentiment indicators closely and will keep you updated.

Econodata July 1

US data: mixed to strong. I will start by saying ISM was a solid report. All components were higher, with exception of exports and imports. SOLID!! On the weak side consumer sentiment was revised down just a bit, and construction spending declined. Folks, we do not need any new homes in US, we have enough existing unsold homes to last us a good while. So ISM definitely wins the contest...

Asia and Australia: Japanese Tankan, both mfg and non-mfg came in weaker than expected. Poor Japan, just can not catch a break.
Chinese Mfg PMI also came in weaker than expected. Both gov't and HSBC surveys are showing a slowdown in Chinese juggernaut economy. Not Good!!! We are going to worry about this now and need to see what Dr. Copper says about it. For those who do not know, copper is a very good indicator of Chinese economy, as it is used for construction. Well, Dr. Copper is up today, so we are not as worried just yet...
Aussie AIG Mfg Index went up. Respectable number after weakness for 3 months in a row. Nothing to see here, mate...

Europe: weak numbers. Swiss PMI came in weaker than expected - another reason why CHF is down today.
UK Mfg PMI weaker than expected. GBP/USD took a dive below 1.60 but came back up, 1.60 - 1.61 range traders are having their couple of days of fun. I see a symmetrical hourly triangle forming. Anyone wanna take a guess which way it breaks out??
EU numbers across the board are stinky. Spanish and Italian Mfg PMI were 47.3 and 49.9 respectively, lowest since Jan. 2010 and Oct. 2009 respectively. Above 50 is considered an expansion and below 50 is contraction, need I say more? Those yesterday's comments by Mr. Trichet sound even more bizarre now. Mr. Trichet said yesterday: "Incoming information in recent weeks has confirmed a positive underlying momentum of economic activity in the euro area". Say what?? Has someone among his staff given him a wrong data? Or maybe his office window is facing North? Southern Europe is in shambles, Sir...

So the underlying theme: world economic activity is slowing down. There are no two ways about it. "Slow patch"?? We will see...