A little imagination, spreadsheet magic, and a deep respect for history made me arrive at this possible bear scenario.
Just two months ago I thought the wheels would come off the wagon. And here we are pushing 1,500 on SPX.
So now that it looks like new all-time highs are just around the corner, I do not want to completely rule out this stunning resemblance to 1970s.
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Sunday, January 20, 2013
SPX - Bear Scenario
Friday, January 18, 2013
Plan For Next Week
I usually study weekly charts on weekend. But hockey (NHL shortened season) starts this weekend, so screw the weekly charts. Just kidding... Let's zoom in instead and look at 4hr chart of ES. I continue to think that market is overextended and is due for a pullback. I know, I have said this three trading sessions in a row, nonetheless that is my outlook and I am sticking with it. I like the open gap area as a target.
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Thursday, January 17, 2013
SOX Is At Resistance
PHLX Semiconductor Index held its 200 wsma and rallied strong along with the whole market. But it is now in resistance zone and at trendline. A pause and a small pullback here would be healthy. This coincides with my view that overall market will also pull back a little.
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Wednesday, January 16, 2013
Relax, It's Just A Pullback
We are getting ready to pull back a little. Do not overreact, it's just a pullback in a strong uptrend. Zoom out and relax. New highs are ahead.
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Google - What's Next?
GOOG needs to get back up there and take out its all-time high, or all bets are off and I show you what could happen next.
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Tuesday, January 15, 2013
Market Thoughts On January 15, 2013
Just because S&P 500 ended the day flat does not mean nothing is happening. Two very important developments are worth discussing.
Dow Jones Transportation Average (DJT) closed at an all-time high today. Dow Theorists are jubilant and preparing for an enormous rally still to come, and probably rightly so. I am a big believer in the theory and have a chart (below) to share with you. When Transports confirm, and especially lead, it is almost always a strong bullish signal for Dow Jones Industrial Average. This said, a pullback is not out of the question, and I would not be surprised to see one right here, as it is never a straight move in one direction - DJT is up 800 points in just 60 calendar days. But be very cautious and nimble on the short side - it will be just a pullback in a bull market which will still go to new all-time highs.
Another major development today was the retail sector. I discussed in my earlier post on December 29th (read here) why so many players, who got spooked by obscure MasterCard study right after Christmas, overreacted and sold at the bottom of the pullback in XRT. December retail sales, reported today, exceeded expectations and proved that American consumers still found the way to continue spending like drunken sailors. I am also questioning all the post fiscal cliff worries about slower retail sales going forward based on the payroll tax increase (or more correctly a return to normal), which will mean less take-home pay for consumers to spend. They will find the way to absorb the average paycheck cut of $20 a week with no negative effect on their spending, I bet.
So XRT went up 2% today. I think the reason for the strong move could be the fact that no major discounting was done by retailers this holiday season due to well-controlled inventory, and since the top line looks like it came in just fine (based on today's report), 4Q2012 bottom line may look much better than feared.
Below is the chart of XRT over SPY. Look at how important the retail sector has been in this bull market. Six times a diverging higher low in XRT has helped to mark a bottom on SPY pullbacks.
Dow Jones Transportation Average (DJT) closed at an all-time high today. Dow Theorists are jubilant and preparing for an enormous rally still to come, and probably rightly so. I am a big believer in the theory and have a chart (below) to share with you. When Transports confirm, and especially lead, it is almost always a strong bullish signal for Dow Jones Industrial Average. This said, a pullback is not out of the question, and I would not be surprised to see one right here, as it is never a straight move in one direction - DJT is up 800 points in just 60 calendar days. But be very cautious and nimble on the short side - it will be just a pullback in a bull market which will still go to new all-time highs.
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| click on chart to enlarge |
Another major development today was the retail sector. I discussed in my earlier post on December 29th (read here) why so many players, who got spooked by obscure MasterCard study right after Christmas, overreacted and sold at the bottom of the pullback in XRT. December retail sales, reported today, exceeded expectations and proved that American consumers still found the way to continue spending like drunken sailors. I am also questioning all the post fiscal cliff worries about slower retail sales going forward based on the payroll tax increase (or more correctly a return to normal), which will mean less take-home pay for consumers to spend. They will find the way to absorb the average paycheck cut of $20 a week with no negative effect on their spending, I bet.
So XRT went up 2% today. I think the reason for the strong move could be the fact that no major discounting was done by retailers this holiday season due to well-controlled inventory, and since the top line looks like it came in just fine (based on today's report), 4Q2012 bottom line may look much better than feared.
Below is the chart of XRT over SPY. Look at how important the retail sector has been in this bull market. Six times a diverging higher low in XRT has helped to mark a bottom on SPY pullbacks.
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| click on chart to enlarge |
Monday, January 14, 2013
Waiting For These Tech Giants To Bounce
Stock market felt the weight of AAPL and IBM today.
I discussed here before why these two giants are the most important indicators of this bull market. They have the heaviest weighting in their main respective indices - NDX and DJI.
I put together a comparison chart that shows how the current scenario may be a repeat of 2010. Both stocks are not trading well and have some unfinished business below their current levels. QQQ (NDX) and DIA (DJI) are going to wait for them to test those levels, and may go a bit lower in the meantime. Once this short-term bearish action is completed, AAPL and IBM will reverse, stop weighing on the overall market, and let it go higher, much higher.
I discussed here before why these two giants are the most important indicators of this bull market. They have the heaviest weighting in their main respective indices - NDX and DJI.
I put together a comparison chart that shows how the current scenario may be a repeat of 2010. Both stocks are not trading well and have some unfinished business below their current levels. QQQ (NDX) and DIA (DJI) are going to wait for them to test those levels, and may go a bit lower in the meantime. Once this short-term bearish action is completed, AAPL and IBM will reverse, stop weighing on the overall market, and let it go higher, much higher.
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| click on chart to enlarge |
Saturday, January 12, 2013
Mattress Money Is On The Move
On December 23rd, I first expressed my view (read here) of possible "mattress money" exodus, which could propel the stocks to new all-time highs. I continued with my observation (read here) on this development on January 4th. The news about reallocation trade is now being trumpeted all over the media, so this will be the last time I will speak on the issue.
Just one week after many institutional players suddenly woke up (courtesy of FOMC Dec. 11-12 meeting minutes) and realized that they may need to sell some of their US Treasury holdings, we find out about major (historical) retail investor fund flows into equity mutual funds and stock ETFs.
Many market watchers will tell you that retail investors always buy at the top. But the fact that retail investors are also joined by institutional investors in this reallocation trade (out of bonds into stocks) may mean that it will take some time to play out. Stay with this trade until it stops working. Use the chart below as your guide.
Just one week after many institutional players suddenly woke up (courtesy of FOMC Dec. 11-12 meeting minutes) and realized that they may need to sell some of their US Treasury holdings, we find out about major (historical) retail investor fund flows into equity mutual funds and stock ETFs.
Many market watchers will tell you that retail investors always buy at the top. But the fact that retail investors are also joined by institutional investors in this reallocation trade (out of bonds into stocks) may mean that it will take some time to play out. Stay with this trade until it stops working. Use the chart below as your guide.
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Sunday, January 6, 2013
Big f--ing deal!
No, I am not talking about Joe Biden, who helped to reach the fiscal cliff deal. I am talking about the NHL collective bargaining agreement between the team owners and the players' association that was reached earlier today.
I am a big hockey fan, so for the past three months (the regular season was supposed to begin in October) I was eagerly awaiting the result of negotiations. Traders need to take their mind off the market and have something relaxing to do in afterhours. Watching hockey is my way of relieving stress.
I want to congratulate those of my readers who follow, admire, or even play this amazing game. We do not have to worry about another possible lockout for the next ten years.
I am a big hockey fan, so for the past three months (the regular season was supposed to begin in October) I was eagerly awaiting the result of negotiations. Traders need to take their mind off the market and have something relaxing to do in afterhours. Watching hockey is my way of relieving stress.
I want to congratulate those of my readers who follow, admire, or even play this amazing game. We do not have to worry about another possible lockout for the next ten years.
Friday, January 4, 2013
Is This Time For Real?
Many market players have been unsuccessfully calling (for a while) for bond and equity funds flows to start reversing. Yesterday's hawkish FOMC Minutes release may have caught most of the bond market "mattress money" asleep. I think that "reallocation trade" may have some legs if economic numbers continue to surprise on the upside. Be ready for NFP in the morning.
Correlation chart is backing up my view, at least for now.
Correlation chart is backing up my view, at least for now.
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