DXY is back between the goal posts. Was DXY breakdown last week a fakeout? Traders are scrambling due to JPY intervention and MF Global-driven risk-off. But really, there are rumblings in EU peripherals due to Greek 50% debt haircut deal. If I was one of the other PIIGS, I would also say "me too, please". EUR/USD finished its relentless stop hunting run exactly at confluence of 61.8% and 78.6% fibs of declines from 5/4 and 8/29 respectively. It does not get any more technical than that.
I anticipated this DXY bounce last week. Obviously, I was early. http://viewonmarkets.blogspot.com/2011/10/dxy-goal-post-breakout-coming.html
Monday, October 31, 2011
Sunday, October 30, 2011
Yet Another Intervention
While I moved away from my screens for a few hours, they hit the panic button in Tokyo. Japanese authorities have intervened in forex market to weaken the Yen in order to support their fragile economy. Japanese exporters are having a tough time competing when domestic currency is strong. All previous interventions had a very short staying power. I think this one is pre-emptive. Here is my thinking:
Dollar has been hit across the board in the last 7 - 10 days due to Yellen/Dudley/Tarullo dove trio. These lovebirds have their nest built right above QE3.
Next week we have 3 possible easings, or strong hints of them anyway, by RBA, ECB and FOMC. MOF/BOJ have probably decided to attack tonight in anticipation of JPY strength due to rate cuts and/or further QE by those central banks. They are also probably doing this to send a message to G20, as their meeting is next week as well.
We have a full-fledged war of central banks. Traders' paradise. Let the volatility rein!
Dollar has been hit across the board in the last 7 - 10 days due to Yellen/Dudley/Tarullo dove trio. These lovebirds have their nest built right above QE3.
Next week we have 3 possible easings, or strong hints of them anyway, by RBA, ECB and FOMC. MOF/BOJ have probably decided to attack tonight in anticipation of JPY strength due to rate cuts and/or further QE by those central banks. They are also probably doing this to send a message to G20, as their meeting is next week as well.
We have a full-fledged war of central banks. Traders' paradise. Let the volatility rein!
Outlook for Stock Market in 2012 - Part 1
With 2011 drawing near the end, it is time to start building a case for stock market in 2012, especially now that I went neutral in my view on markets in the intermediate term. In the next two months I will be putting a scenario together, which will help me to prognosticate what 2012 will look like. Today I would like to begin this task by sharing a few trivial facts.
Fact # 1
I am not a baseball fan, I am a hockey fan. But I paid very close attention to game 7 of World Series. Cardinals won (for the 11th time). On Monday morning the following phrase is going to be on the lips of every bull on stock market: "when Cardinals won World Series, Dow went up on the average of 13% in subsequent year". The only negative year came in 1932.
Fact # 2
2012 is a 4th year of Presidential election cycle, which has historically been very favorable for stock market. Since WWII, S&P 500 went up on the average of 14% during US Presidents' 4th year in the office, with very notable exceptions in 2000 and 2008.
I decided to mention these very interesting and entertaining facts, while gathering more important data for my 2012 prediction. My second part will concentrate on fundamentals. Stay tuned...
Fact # 1
I am not a baseball fan, I am a hockey fan. But I paid very close attention to game 7 of World Series. Cardinals won (for the 11th time). On Monday morning the following phrase is going to be on the lips of every bull on stock market: "when Cardinals won World Series, Dow went up on the average of 13% in subsequent year". The only negative year came in 1932.
Fact # 2
2012 is a 4th year of Presidential election cycle, which has historically been very favorable for stock market. Since WWII, S&P 500 went up on the average of 14% during US Presidents' 4th year in the office, with very notable exceptions in 2000 and 2008.
I decided to mention these very interesting and entertaining facts, while gathering more important data for my 2012 prediction. My second part will concentrate on fundamentals. Stay tuned...
Friday, October 28, 2011
Is TNX Anticipating QE3?
A few days ago I wrote about how QE3 talk from Yellen and Dudley is pushing Gold up from last week http://viewonmarkets.blogspot.com/2011/10/gold-has-its-magical-powers-back.html
Unless Fed statement next week will dispel what Yellen and Dudley said in their last speeches, QE3 will get even more attention.
Bond traders could be anticipating QE3. Even though TNX has rallied 35% from low on Oct 4th, it is still below where it was the last time SPX traded @ 1285, which was 27.40 on Aug 1. If TNX can not return to that level after biggest monthly equities gain ever, and after GDP just printed 2.5% in Q3, then there is a pretty serious reason why it stays here. I say it is a smell of QE3 in the air.
This morning ForexLive has mentioned a "circulating report from well-known think tank about Fed embarking on QE3 via mortgage bond purchases". I agree with them, especially after pending home sales declined 4.6% in September. My notion has always been that Fed has to support and inflate US housing market, thus increasing our biggest asset's value. They can not stop, they will be in that market until it can operate on its own.
One development that could derail my thesis about lower TNX is inverted h+s with neck in 22.70 area. Price broke out above the neck and seems like it is currently backtesting. This would be a possible technical to go against my notion of QE3. I will keep you updated.
Update Nov 1 @ 12:40 pm
Neck broke, backtest failed, TNX is below 20.
50 dsma becomes resistance. European debacle helped the move, which I still think started due to QE3 talk. FOMC statement and Bernanke's presser to be watched closely.
Update Nov 2 @ 3:40 pm
Nothing FOMC did or said today makes me believe any less that QE3 is coming. As the matter of fact, now that the only dissenter is a dove, QE3 is a more likely Fed policy course.
Unless Fed statement next week will dispel what Yellen and Dudley said in their last speeches, QE3 will get even more attention.
Bond traders could be anticipating QE3. Even though TNX has rallied 35% from low on Oct 4th, it is still below where it was the last time SPX traded @ 1285, which was 27.40 on Aug 1. If TNX can not return to that level after biggest monthly equities gain ever, and after GDP just printed 2.5% in Q3, then there is a pretty serious reason why it stays here. I say it is a smell of QE3 in the air.
This morning ForexLive has mentioned a "circulating report from well-known think tank about Fed embarking on QE3 via mortgage bond purchases". I agree with them, especially after pending home sales declined 4.6% in September. My notion has always been that Fed has to support and inflate US housing market, thus increasing our biggest asset's value. They can not stop, they will be in that market until it can operate on its own.
One development that could derail my thesis about lower TNX is inverted h+s with neck in 22.70 area. Price broke out above the neck and seems like it is currently backtesting. This would be a possible technical to go against my notion of QE3. I will keep you updated.
Update Nov 1 @ 12:40 pm
Neck broke, backtest failed, TNX is below 20.
50 dsma becomes resistance. European debacle helped the move, which I still think started due to QE3 talk. FOMC statement and Bernanke's presser to be watched closely.
Update Nov 2 @ 3:40 pm
Nothing FOMC did or said today makes me believe any less that QE3 is coming. As the matter of fact, now that the only dissenter is a dove, QE3 is a more likely Fed policy course.
Thursday, October 27, 2011
Bull Market in 18 Sessions
It certainly has been done before (just like in Oct of 1998), but nonetheless it is astounding that we now had a bull market in 18 trading sessions. As I type SPX is up 20% from the low on Oct 4th.
I am not fighting, not joining, not doubting, not changing my mind, not doing anything, just watching. I have a goal, a plan, a roadmap, a responsible and well-designed system. Do not buy highs, do not sell lows, do not overreact, do not fight the trend, do not change your mind when a guy on TV says "those who overanalize will lose, it is time to buy, buy, buy". Really Jim C, do those words of wisdom sell your books and attract the viewers to your nightly show?? What a joke!
Yes, I missed every one of these long points from just below 1200 on SPX, but lost opportunity does not equal lost money. As I said on Oct 4, I am done with shorts until the end of the year, but that does not mean buy the highs. Just waiting for my setup, waiting for that specific moment when all of my criteria are met, and turning the stupid TV off.
Waiting for a credible pullback to reload my long. You just can not be in every move. Flat and mad!
I am not fighting, not joining, not doubting, not changing my mind, not doing anything, just watching. I have a goal, a plan, a roadmap, a responsible and well-designed system. Do not buy highs, do not sell lows, do not overreact, do not fight the trend, do not change your mind when a guy on TV says "those who overanalize will lose, it is time to buy, buy, buy". Really Jim C, do those words of wisdom sell your books and attract the viewers to your nightly show?? What a joke!
Yes, I missed every one of these long points from just below 1200 on SPX, but lost opportunity does not equal lost money. As I said on Oct 4, I am done with shorts until the end of the year, but that does not mean buy the highs. Just waiting for my setup, waiting for that specific moment when all of my criteria are met, and turning the stupid TV off.
Waiting for a credible pullback to reload my long. You just can not be in every move. Flat and mad!
Is Market Rotating?
In my previous message this week I mentioned how RLX was a strong leader this year. This morning I am noticing that RLX is not making new highs above recent highs, thus not confirming the move. I am not yet making much out of this, which could be a simple fact of market rotating from leaders into what was lagging, i.e. out of RLX and NDX into XLF, XHB, and such. Stay tuned for my further updates on this development.
Is 2011 just like 1998?
Could be. Just like in 1998 (when Russian debt crisis collapsed LTCM and brought our markets down) it is PIIGS debt crisis that brought our markets down now. Just like in 1998 (when decline was between July 20 and Oct 8) SPX started its 2011 major decline on July 22 and bottomed on Oct 4. SPX dropped 22.4% in 1998 from top to bottom - SPX dropped 21.5% this time (from top on May 2 though).
Now I want to know the only important thing - will SPX do now what it did in 1998 between Oct 8 and Dec 31??
In 1998 SPX went up 35% from Oct 8 to Dec 31 on a steady and uninterrupted ascent, in which it blew passed all resistance levels and moving averages in its way. If SPX does the same thing now - it would go to 1450. Will this happen? Here is my honest answer - I have no idea. My end of year target is 1250 - 1300. You can see how the above scenario may put a slight dent in my theory.
Update Oct 31 11:20 am
Add another stunning resemblance to 1998. This morning MF Global has filed for bankruptcy as a result of European debt on their books.
Now I want to know the only important thing - will SPX do now what it did in 1998 between Oct 8 and Dec 31??
In 1998 SPX went up 35% from Oct 8 to Dec 31 on a steady and uninterrupted ascent, in which it blew passed all resistance levels and moving averages in its way. If SPX does the same thing now - it would go to 1450. Will this happen? Here is my honest answer - I have no idea. My end of year target is 1250 - 1300. You can see how the above scenario may put a slight dent in my theory.
Update Oct 31 11:20 am
Add another stunning resemblance to 1998. This morning MF Global has filed for bankruptcy as a result of European debt on their books.
Wednesday, October 26, 2011
NDX is the laggard now
For a change NDX is lagging DOW and SPX.
As I type, EZ debt solution has been reached via EFSF leveraged to E1T, and Greek 50% haircut agreement.
ES, YM, and NQ are springing towards YH. But while YM just broke out to new high and ES is almost there by 2 points, NQ is 1.5% below its recent high. I am not sure if this is highflyers' (AMZN, AAPL, and NFLX) earnings debacle finally weighing NDX down, or simply the fact that leadership is about to change going forward. We also need to see if perhaps this is yet another one of this year's many non-confirmation fakeout moves.
Divergence has been the best contrarian indicator this year. It was SPX and DOW who did not confirm NDX a few times. NDX is returning the favor this time. Lets see what happens during the cash session tomorrow.
Update Oct 27 11:05 am
NDX printed a new high and quickly sold off. Slow stochastic on daily is no longer embedded in overbought. Stay tuned for further updates.
Update Oct 27 2:00 pm
NDX is now above YH. It is playing catchup still, up about 0.5% less than SPX. There is no place to hide for bears, they are simply crushed today. The only question I have now - when am I going to get my credible pullback below 1200 on SPX to reload the long? Does not look promising, but better than being short. Flat and mad! LOL
As I type, EZ debt solution has been reached via EFSF leveraged to E1T, and Greek 50% haircut agreement.
ES, YM, and NQ are springing towards YH. But while YM just broke out to new high and ES is almost there by 2 points, NQ is 1.5% below its recent high. I am not sure if this is highflyers' (AMZN, AAPL, and NFLX) earnings debacle finally weighing NDX down, or simply the fact that leadership is about to change going forward. We also need to see if perhaps this is yet another one of this year's many non-confirmation fakeout moves.
Divergence has been the best contrarian indicator this year. It was SPX and DOW who did not confirm NDX a few times. NDX is returning the favor this time. Lets see what happens during the cash session tomorrow.
Update Oct 27 11:05 am
NDX printed a new high and quickly sold off. Slow stochastic on daily is no longer embedded in overbought. Stay tuned for further updates.
Update Oct 27 2:00 pm
NDX is now above YH. It is playing catchup still, up about 0.5% less than SPX. There is no place to hide for bears, they are simply crushed today. The only question I have now - when am I going to get my credible pullback below 1200 on SPX to reload the long? Does not look promising, but better than being short. Flat and mad! LOL
No reason to fight the trend on SPX
Unless Zero Hedge is your home page, you probably have identified that short-term trend of the market has been up. It is OK to try to pick a top with very small size and a tight stop just above the high, but fighting this rally in a big way from low on Oct 4 has not been a kind proposition for bears. I am continuously reading commentaries about how the market is going to hell from here. I have to respectfully disagree. If anything, SPX is simply overbought on short-term basis, and will reload at lower levels, if those ever present themselves. A very good momentum indicator - daily slow stochastic has been embedded in overbought since October 17th (thanks to Ira Epstein for teaching me this). There has not been a single close below 8 ema on daily since Oct 5th. If you are fighting these strong technical facts with all your might - you are about to lose your shirt. Just stop, assess the situation, try to identify the trend, do not trade what you think.
If you want to short, look for quality setup and add in the direction of the trade, set your stop and do not fight the trend once new highs are achieved. These trades against the trend (if you choose to make them) have to be quick, with multiple scale-ins and scale-outs, and stops brought to break-even after first target fill. It is very hard to do and requires a very good trading skill.
Preserve your account, live to fight another day!
If you want to short, look for quality setup and add in the direction of the trade, set your stop and do not fight the trend once new highs are achieved. These trades against the trend (if you choose to make them) have to be quick, with multiple scale-ins and scale-outs, and stops brought to break-even after first target fill. It is very hard to do and requires a very good trading skill.
Preserve your account, live to fight another day!
Gaps, Gaps, Even More Gaps
Trading range in SPX is established. We have a top at 1256, bottom at 1075, and mid at 1166. We are going nowhere fast until EU cleans up the mess.
There are gaps below and above. My feeling is we push to close 10/21 gap @ 1215 first.
Below that there is a remaining open gap @ 1156.
One gap is looming above @ 1254.
Have fun trading these!
Update Oct 26 5:20 pm
SPX rallied on the back of China saving the world.
It sure looks like 1254 gap may become a magnet for tomorrow's session.
We came 6 points short of filling 1215 gap today.
Market is wild and very unpredictable due to European news headlines.
Be careful out there...
There are gaps below and above. My feeling is we push to close 10/21 gap @ 1215 first.
Below that there is a remaining open gap @ 1156.
One gap is looming above @ 1254.
Have fun trading these!
Update Oct 26 5:20 pm
SPX rallied on the back of China saving the world.
It sure looks like 1254 gap may become a magnet for tomorrow's session.
We came 6 points short of filling 1215 gap today.
Market is wild and very unpredictable due to European news headlines.
Be careful out there...