Friday, March 9, 2012

Trading Notes Before NFP

This post will be Eurolesszone, let's take a rest from that madness. There is so much more to discuss...

Rinse and repeat
I think that stock market bounce of the last two sessions is a retrace before another leg lower. I posted what I expect S&P 500 futures to do, I stand by my prediction. Today will probably be the start of the next decline. Let's look at SPX cash scenario. Blue square is a projected target area, may not be all in one move though... Scale out if you are lucky to catch this decline.

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Baseball fans, listen up! Just kidding... When CY warned earlier in the week, I thought to myself: "there will be more". Sure enough ALTR and TXN joined the party in afterhours on Thursday. If CY's excuse was wireline weakness, the worries from ALTR and TXN are going to resonate a bit louder - both blamed wireless customers. This, folks, is no joke! SOX did exactly what I expected. It now retraced back to broken H+S neckline. I expect the next leg lower to sub 400 level to start soon.*

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Dow Transports
Here again I will talk about a retrace. 50 dsma and upper t/l of the declining channel will serve as a resistance. I expect the next decline to target 4,980 level, which (by the way) would be negative on the year.*

click on chart to enlarge

*Please note: both DJT and SOX have led the declines in the rest of the market, hence they bounced more than the whole market in the last two days. I think that while they will go slightly lower than previous low (from three days ago), they may consolidate at that point while waiting for the rest of the market to catch up. While I am bearish in a very short term, you can clearly see that declines (which they are currently experiencing) are still within bullish structure. Do not get carried away, scale out your profits.

I am not sure today's report matters much, unless it beats by a lot. As the matter of fact, I think it may serve as an excuse for many bulls to take some profits. Earnings season is over, no more news to propel the market higher, unless AAPL decides to wow us with some TV gadget in the next few days.

What is this talk about reverse-repo QE3? This is silly and dangerous. I am also a little skeptical about the leak via the newspaper. Coincidence with the rumor coming out the day after the biggest stock market decline of the year is really suspicious. Was it done to calm the market and put a bid under it? In any case, can Fed do it on a large scale and not raise the short-term rates? Makes no sense (to me at least)...

Trade of the year
Vital Keystone XL oil pipeline was axed in Senate today. This is pure madness and will not go unnoticed. I bet all those who voted against will be voted out in November. Gasoline is going to push higher.
I am getting ready to put on a second leg of my trade of the year (long RBOB / short XRT). While XTR made a new all-time high today, MACD and Stoch did not confirm. This divergence can not continue much longer...
Goldman Sachs Weekly Chain Store Sales y/y growth for week ending March 3rd came in the slowest in more than a year. Gasoline prices are starting to eat into consumers' wallets. This is just the beginning, you ain't seen nothing yet!

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Has anyone paid attention to Australian econodata lately? It has been coming in weak. Is slowing China growth affecting Australian economy?? It looks like someone has noticed: S&P/ASX 200 and AUD/USD are rolling over. S&P/ASX 200 broke the trendline, backtesting as I type, should get rejected and continue down some more. AUD/USD should follow, as the two are very closely correlated.

click on chart to enlarge

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