Saturday, July 27, 2013

Does This Look Similar To You?

I wanted to share this E-Mini SPX futures chart with my readers. Note how similar the structures are. If this scenario continues to unfold, it looks as if there is going to be a little dance with prior highs next week, but then it may be followed by a steep decline. FOMC meeting may give the price the reason to double top. Perhaps the anticipation of QE4Ever and subsequent disappointment will make the chart look similar to the end of May, when the wheels came off the wagon.

I am so sorry to rain on bulls' parade, but I can't be bullish at this level, as SPX cash has already reached my 1680 year-end target. Anemic GDP growth, corporate revenue recession, and possible peak in operating margins are some of the reasons not to raise my year-end target. And of course, the biggest reason for my view on market's possible pause here - is the TaperTrade.

click on chart to enlarge

Wednesday, July 24, 2013

Beginning Of The End?

Could today be the beginning of the end for stock market's ascent higher? Good earnings from AAPL did not help SPX penetrate 1700. I am not an AAPL fan, nor do I want to make too much emphasis on the stock. But I think that AAPL is heading higher. What is more surprising - I think that at the same time SPX is going to go lower. What??? Yes, this is my outlook: AAPL will outperform SPX for the rest of the year, and in the next month or so tremendously. I think that SPX will eventually catch a bottom around 10% or so below today's high, and will head higher as well.

While I do not really give a darn about AAPL, which now looks like it may have put in a double bottom, and may be trading in 505 - 555 area by the end of the year, I do want to zoom in on SPX and try to predict its possible targets on the downside. It is all going to depend on how the price reacts to the yellow lines on my chart below. Once they go, blue lines are going to act as magnets.

click on charts to enlarge

Sunday, July 21, 2013

Are You Ready For A Double Top? - Part II

So I am doing my usual weekend reading, and of course Detroit bankruptcy is dominating the headlines. I typed Detroit in the Google news search (on this a little later) and I did not believe my eyes: "Goldman Sachs is shuffling aluminum between their storage warehouses in Detroit". Can you say double top? Here is my simple and quick explanation. 

Financials are going to be under pressure on this development. It is going to be a stinker. Let's bring back those "fat cats" and cut their tails off. Don't mess with the man's soda can! Commodity sector will take a beating on this as well.

And as promised above, Google missed its Q2 earnings by a mile. Anyone who thinks this one gets forgotten quickly is simply dreaming. Their main business metric - cost per click - was atrocious. And on the same day MSFT reminded us what a dinosaur it really is, missing its earnings. Tech took a serious beating on Fri, including IBM, which supposedly did really well on its earnings just a day before, gave all of the gains back - not good.

So here you have it - two largest weighted sectors of S&P 500 are going to be under pressure. I do not see how this can be brushed aside by the "energizer bunny" stock market this time. I say we have a little double top with 10% correction here. 

I will add charts (of all discussed subjects) to this post later today. Time to hit the beach...

Here they are...


click on charts to enlarge

Saturday, July 13, 2013

Are You Ready For A Double Top?

Picking tops has not been a kind proposal this year. This time it may be no different. Price may once again go through the prior high like hot knife through butter. But what if it won't? Will you be ready?

So what to do now? If you are long, you may not need to do anything at all, just trail your stops. But if you are looking to get (conservatively) short, patience will definitely be needed, as the price will have to reverse and slice through some supports first. Aggressive shorts will be establishing between here and 1687 on SPX (without waiting for the reversal). Targets are aplenty below, all the way down to -15% from current level.

This may sound like a pipe dream, but volatility may come out of nowhere and increase exponentially in usually slow and illiquid end of summer. My favorite scenario is a double top here with steep downside through the beginning of September, followed by steady rally into the end of the year. Nobody is talking about a possible double top here, hence no one is ready for it.

click on chart to enlarge

Wednesday, July 10, 2013

Follow Dollar/Yen

As goes USD/JPY so may SPX. From the bottom in November of 2012 the two have been in lockstep. But now that Helicopter Ben decided to burn the dollars again, he may throw some carry trades under the bus, SPX included. Fed Chairman may be surprised at the eventual outcome of his dovish stance (earlier today). The market is celebrating QE4Ever tonight. But after the dust settles, market participants may finally concentrate their attention on the main reason for Chairman's dovishness - his fear that rapidly rising interest rates will choke the slow economic growth.

click on chart to enlarge