What We're Reading

spx (69)


S&P500 Monthly Supports

Merely my observation of the S&P500 based on it's 20 year monthly chart.  It would appear most 'dips' were bought heavily at the 20month SMA with the 20month (off the low) SMA being the line in the sand..........at least on the last two 'bubbles'.

The 20m (off the low) then became overhead resistance. 

Just food for thought.  I have sent an alert for SPX at both levels in an effort to "buy like the big boys".  At least buying 'there' is limiting my downside risk (wink wink).  We could definitely bounce before then but the MACD looks to be rolling over somewhat and let's face it; October is a tough month.  I'm sincerely anticipating further volatility as even semiconductors and rails are exhibiting signs of selling.  I look forward to buying cheaper; aren't you?…

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Looking Back At The Market

The ECB left its key lending rates at record low levels, and the four-week moving average for initial claims is at an eight-year low.  That sounds like a pretty good setup for a stock market that worries about earnings prospects tied to a stronger dollar, loves the thought of central bank policy rates holding near the zero bound, and is anxious to see evidence the U.S. economy is gaining momentum.

Despite the setup, it has been a swing and a miss so far for the stock market, which has once again been greeted with steady, and broad-based, selling pressure.

ECB President Mario Draghi is getting a lot of blame for the disappointing price action based on reports that his presentation regarding the ECB's asset-backed securities purchase program was lacking and the…

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Divergence Continues

Pick any one of 10 difference reasons; does it really matter?

  • Autumnal solstice
  • End of quarter
  • End of fiscal year
  • Rosh Hashanah
  • CALPERS beginning to liquidate hedge fund positions
  • Curreny-related pressures
  • Concern over weak earnings
  • Weaker China growth
  • Russia's asset seizure proposal
  • EU growth concerns
  • China's $10 in…

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Rosh Hashanah Trading

The weeks between Rosh Hashanah (which begins tonight at dusk) and Yom Kippur (October 4th) can be volatile ones with some traders taking time away from their desk to be at home with family and lower trading volumes exhibit themselves as a result.

While the old saying goes "never short a dull market", low volume tends to be bullish BUT there could also be a problem if there's no underlying bid, or bids are being lowered on a continual basis.

As of this moment, the September low is being tested; bears hoping to trigger stops below $1979 which would issue a wave of further selling.

It's important to understand the dynamics behind the candles on the screen, where stops lie and how the market has traded historically.  Be nimble or sit it out.

Data courtesy…

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SPX Breadth Is The Problem

Edited 9/24/14 7:40am

Market breadth has deteriorated badly once again. In fact, breadth hasn't been strong for several months (since early July).  Even last Friday, when the market gapped higher on the Alibaba (BABA) mania, breadth was negative — a divergence that proved to be significant so far this week.  Cumulative breadth has been a problem since July.  Were market makers (MM) merely propping up the market until the IPO went off?  Surely a market selloff leading up the launch could risk Alibaba founder Jack Ma to possibly post pone the event; a smear the market wouldn't want to face (not to mention unhappy investors).

I'm sure …

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The Bulls Push Back

Just when the (last few remaining) bears were enjoying some market wide liquidation, China apparently launched some stealth QE of their own reversing AUD/JPY and sending markets plowing over weak bears.  From Bloomberg:


According to Government Sachs

"This amount is roughly the same as a 50 bps cut to RRR for the whole banking system on a static basis.  Still, such an easing would be consistent with our expectation that…

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If The 10 Year Were A Stock

I'd be trading this bad boy to the long side.  In this seven year weekly chart, not only has it broken my three trend line rule, there was positive MACD convergence (as shorts began to massively cover) and the 200week SMA which was prior resistance, has now become support. 

It certainly appears that the "low" in low rates was in in 2013.

I should also note that the monthly chart is deeply oversold.  At some point, you simply run out of sellers.

I've long said that when in mortgage banking, we watched the 10yr. each week for direction of rates and we completely ignored the Fed raising or lowering rates.  They were a laggard; the 10yr was already there.

Yep.  If this were a stock, I'd be trading it long, buying at support or out of the short side…

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Market Snapshot August 3rd

Everyone knows our beloved five year rally seems to be weakening of late.  The big question is just "how" weak will it become.  If anyone tells you they know that answer, stop reading that website.  Certainly more and more sectors are now exhibiting profit taking even as fund managers lounge sipping Mai Tai's from their catamarans off the coast.  Indeed selling can beget more selling, however that doesn't mean we may not see a few days of buying to test overhead resistance and see if it holds; if the "top" is truly in.

Now is not a time (imo) to add to a long position.

Now is a time to be hedged or flat in a long portfolio.

Now is the time for day trades or brief swing trades.

Now is a time to let the charts show you direction.

A second enormous…

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The Draghi Squeeze

Sectors are squeezing higher in anticipation of ECB rate decision, expected to cut rates another 25-50bp (negative rates - wow) and possibly announcing LTRO (long-term refinancing operations) tomorrow before U.S. markets open in an effort to reign in inflationary pressures across the pond. I would assume much of this has been "baked in" however $1941 remains very doable.
One thing for certain if they don't, it will be ugly........but I'll still buy the dip.

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What Are The 1% Investing In Now?

"The market is not cheap but it is not especially expensive either," writes Laszlo Birinyi, calling for the S&P 500 to take out 1,970 between now and the end of September.

Lackluster economic data, so-so corporate earnings, and blowups in many Internet, social media, and biotech names aren't a concern, but instead a positive.

"The overall market is shrugging off the tech and biotech problems, and that’s important ... [it's] “the last stage of a great bull market. It’s the exuberant phase.”

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Deflation or Recession?

Is that what the 10yr is signalling?   The EU doesn't have the mechanism to launch quantitative easing.  Raising rates would pressure their recovery.  Has Draghi painted himself into a corner? 

The U.S. is having to accept the "taper" while slow growth persists.  Maybe it's time to get back to reality and fundamentals.  Actually that works for me because I'd much rather buy stocks with S&P500 at the 100week than "here".  Only time will tell but hedging and shorts are (finally) working.

The 10yr is definitely not happy and is trying to bounce off of 2.6 but if that goes.........look out for more pain (for equities).  Seems as though sell in May was a good idea after…

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Diamond Tops and Head and Shoulders

If there were ever tops, here's what they potentially resemble with heavy volume (distribution) accompanying.  As GT pointed out, the "megaphone" patterns also resemble "diamond tops" and take one guess which way these appear to be leaning? (click images to enlarge)   Trade the direction of the break, but it's ain't looking too pretty folks.  Stayed hedged or stay on the sidelines.

For what it's worth, here are four inverse, leveraged ETF's on my radar.…

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Reasons the market looks ready to pull back May-July:

  1. Treasuries have a relentless bid recently, and as I have discussed recently there was major accumulation of 80,000 Treasury (TLT) July $113 calls. Although this is just one large position, action in the TLT has tended to be right, and can see my call from 2013 to short the TLT in the 120's before it crashed to below 105.
  2. Sector flows showing a flight to safety. The consumer staple names and large caps are starting to outperform, a risk-off market, and options action dictating the same with most of the sizable call buying occurring in boring large cap names like McDonald's, Wal-Mart, Pepsi, along with Energy.
  3. Seasonality - The market tends to struggle in the May-July period, and although I do not have the numbers on me, @RyanDetrick is always posting great data, and also aligns with the Presidential cycle.
  4. Price-Action in Momentum - I am watching a premiere growth name like Under Armour…

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The Correction Is Not Over

When Louise Yamada talks, I tend to listen.  We'll be watching closely the next few days as the market back fills and if individual names fail at their 200d and 50d.  Will more double tops form and still other head-and-shoulder tops fail as their neckline are tested?  Some still feel the market is fairly valued.  Some still feel the market has gotten ahead of EPS.........and earnings (expected to be very lackluster) have just begun.  Let us not forget "sell in May and go away" fast approaching and as Louise points out, distribution tops can take quite some time to develop and sell.  I'm tempted myself to hit the road.  Aruba is calling my name.  Wall of worry is one thing but low-to-no earnings is another.  Only time will tell.

In full disclosure, several members are scalping longs here common in USO, UNG, FB, FEYE, BAC, GILD, V, RHT (and various option plays), having bought on Mondays low but all seem to be expecting failure at…

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