Monday, July 30, 2012

Is This a Game?

"We will do whatever it takes to preserve the euro" statements are now once again all over the media. Eurozone leaders throw these words around every time they get scared that game over is near. What do they have up their sleeve this time? Have they been getting ready for this new action? I bet not. If they have, they would have done it already. Granted, this time Mario painted EZ leaders into the corner with his pledge, forcing them to act. Frantic meetings were held over the weekend, and more are planned for this week. Emergency! Emergency!

But we have seen this movie before - words are bigger than action, and disappointment immediately sweeps through the financial markets after the announcement. I think we are in for another one of those yet again.

On Thursday we get to see how many coins the question mark bricks hold for Mario to advance him to the next world. Somehow I think it may not be enough to save the Mushroom Kingdom.

Game Over    

Friday, July 27, 2012

Do No Harm

First and foremost rule of trading - do no harm.
Do no harm to your account, your firepower, your trading style, your mental physique, your trading career!

Today I am missing a rally above 1357 on ES. That was the level I wanted to short just two days ago. I went long at 1337, but "chickened out" of shorting 1357 after I heard second most powerful banker on the face of the Earth say that he "will do whatever it takes" to destroy euro bears. I am not going to go into details on how that affects ES, but let's just say the chart from 6 am yesterday should tell you what it means.

Am I mad? No.
Am I upset? A little.
Will I chase this move? No.
Do I want to short up here? There is absolutely no quality set up, so the answer is - No way.
Am I confused? No.
Am I going to do anything about this? No.
Do traders have to be in position at all times? No.

I am staying flat, safely, unharmed by what could be a pure stupidity of fighting an upcoming central bank action, as the chatter of such picked up further today. I have been writing here about how important it is to identify the changes in the market and adapt to them. My trading plan got scrapped and I posted that here yesterday. I am staying flat through ECB meeting, awaiting the results to identify the next big move.
There is absolutely no possible way to be in every move. I missed this last part of the rally above 1357. It could be worse, I could be short 1357 and having to cover up here, and become a weekend fried bear special at my local restaurant.

Trade smartly and stay tuned for updates...

Thursday, July 26, 2012

Two Problems

Well, getting 20 ES points in the matter of hours this morning was a gift from Mr. Draghi. But he was not a part of my outlook. Super Mario beat Helicopter Ben to the punch, and threw a monkey wrench into my chart. So what do we do now? I will be frank and say that I am not really sure. I am a brave trader but not stupid to stand in front of these two most powerful people in the banking world. Between two of them we could have a $ Trillion or so spilled on us next week. Do I think it will happen? No. Do I want to risk a chance? Not really. I will sit tight until FOMC and then decide if I want to deal with ECB on Thursday. Like I said in my previous post - I will "trade smartly". One thing I can tell you: if both of them do nothing next week - step on the "sell" button with your foot.

Wednesday, July 25, 2012

Are You Ready for a 100-point Drop?

This is what I think S&P 500 futures are going to do next. 20 points of upside are followed by a 100-point drop. Be careful, use stops, and trade smartly.

click on chart to enlarge

Tuesday, July 24, 2012

Transports Near Death

Well, not literally. But there is a death cross developing on the daily chart. The last one occurred in 2011 and was very deadly for transports and the market overall. This morning UPS reported a miss and guided lower. I plotted it over the Dow Jones Transportation Average. Keep your eyes on this development.

click on chart to enlarge

Richmond Fed - Off The Cliff!

Never mind the fiscal cliff, things are not swell in the Mid-Atlantic region today. I always pay very close attention to Richmond Fed Mfg Index, since this is where I reside. If you are looking for improving economic conditions, look somewhere else. This was an absolute stinker of a report - the worst since March of 2009. Market will not like this at all.

click on chart to enlarge

Saturday, July 21, 2012

Enough Already

What I started questioning on my blog three days ago, is now all over the media. I feel that I will become a broken record if I continue to beat the drum on this issue. My work on this market phenomenon is completed.

This article from IBD very eloquently sums up what I discussed for the past 72 hours. A great read...

Friday, July 20, 2012

Stay Focused

This morning the list of companies which missed revenues expectations is growing. Add none other than GE. Market is down on that firstly.

Of course many will make you believe that it is all because of Spain, Valencia, and Euro. Yes, it is partially because of Eurogeddon, but my main notion for the last few days has been missed revenues by large, mid, and small cap companies. It is a sickness across the board. I will compile a list shortly (not ready due to lack of spare time) and post it here. Meanwhile it is growing, and growing, and growing...

Thursday, July 19, 2012

Deceptive Practice

I am going to voice the same concern until those who are buying this market can prove to me that it is irrelevant. After the bell high profile earnings reports from GOOG and MSFT revealed the same underlying theme - both companies missed on revenue but beat EPS expectations. The same thing happened yesterday with IBM. I strongly think that this does not bode well going forward. Companies continue to find many ways to cut their costs in order to beat on the bottom line. But if U.S. GDP is not going to grow at what was projected, as it now gets downgraded on almost daily basis due to worse-than-expected economic reports, there will be more pressure on the top line. Eventually the bottom line will suffer as well. The management of U.S. corporations is very creative and knows how to play the game with investors - grow your earnings per share and they will come. I refuse to give into this deceptive practice. I am actively and willfully shorting SPX right now. When analysts start cutting their 2012 / 2013 EPS projections it will be too late. 

Wednesday, July 18, 2012

Very Important Support Line

VIX is at long-term support. Time to sell SPX. All the noise of better-than-expected earnings, which by the way are nothing but cost-cutting shenanigans as the revenues are consistently missed, will be well-forgotten in the wake of worse-than-expected economic releases. Tomorrow we get to see what Philly Fed looks like. After reading the Beige Book earlier today, I would say Philly Fed is going to be below expectations. Shorts are being squeezed into OpEx on Friday. After this event is out of the way, down SPX will go. Look out below!

click on chart to enlarge

Tuesday, July 17, 2012

Cue Up The Scary Music

IBM is very closely correlated with SPY. Negative divergence can now be seen. IBM reports tomorrow after the bell. If Q2 report does not stop the slide, there will be a death cross on daily chart soon. The last one occurred in 2008.

click on charts to enlarge

Tuesday, July 10, 2012

Dirty Socks

If you are long risk assets (especially tech) and not paying attention to the following chart, perhaps a smell of something less desirable will alert you pretty soon.

AMD last night and AMAT this morning merely confirmed what the chart told us days ago.

NDX will follow SOX into the dumpster...

click on chart to enlarge

Thursday, July 5, 2012

Looking for Reasons to Sell

This is not the first time that I find myself in this position. I am long but looking to reverse on first opportunity. Market has to give me a reason or two. This is bizarre! Why the heck do I want to go short?

AAPL and GOOG are up 1.8 and 1.4 percent, thus keeping NDX from going lower. iPad mini or whatever is the reason, I do not care... SOX is not confirming - rejected at 200 dma for the second day in a row. It is between the goal posts (50 and 200 on daily) at the moment. If 200 is taken out I will stay long, if 50 goes on the downside - all long bets are off then...

click on chart to enlarge

Transports are looking for a breakout, again. It would give the Dow Theorists an extra reason to push Dow Industrials higher.

click on chart to enlarge

Rate cuts from PBOC and ECB, additional QE from BOE, and the result on equities is - nil. This is extremely discouraging. I understand, NFP is out tomorrow morning and many players are not going to commit in a big way. But getting absolutely nothing in response to coincidental easing from the big 3 CBs is definitely upsetting and alarming.

Chain store sales are not very strong, but it is summer, so I will not be too demanding. XRT is up 1% today, perhaps the weakness was already priced in. Or could better-than-expected ADP be the culprit for higher prices in retail sector? (Better jobs report = better retail sales...) Speaking of which, can better-than-expected NFP tomorrow mess up the QE3 front-running trade? This alone could be a good reason to sell SPX, in my very humble opinion.

click on chart to enlarge

Q2 earnings warnings are coming from all over the place. They are ugly, to say the least... It could be too late to push the sell button when earnings are reported, as Q3 guidance may be even weaker then. Is the anticipation of crappy earnings season, which begins next week, the reason for why VIX was up 5% today? On a relatively flat day...

Technically speaking nothing on the big picture says to sell yet. SPX 1380 - 1400 resistance may be taken out and become a launchpad for even higher prices. Could it also become a blow-off top? Sure, but one has to be patient here... Wait for the signal!
If fundamentals are confusing, then I go with the technicals, and they are pointing to higher equity prices for now.

There is a lot to think about here. Believe me, this is half of the stuff going through my mind. If I see the technical picture get progressively worse, I will jump to the other side very quickly.

Tuesday, July 3, 2012

Confusion Reigns Supreme

At mid-year mark I find myself at crossroads. No, I do not mean my own self, but rather my view of SPX and its immediate direction.

For starters, I am just a no non-sense trader. When I get a signal I take the trade, put a stop and target in, and leave the thing alone. But boy oh boy, I swear it has not been easy last couple of weeks. Just as I thought market should ramp up into 1375 - 1400, it dove, triggering my trailing stop on stinky Philly Fed. A hefty profit was made, nonetheless. Then I thought perhaps the trading range is in order. That quickly got demolished by the close above June 19th high, triggering my long entry. So now I am back at it, and to be frank, not loving the market at all. Reluctant long, I am looking to be a bear shortly. I can feel it around the corner, days, hours, minutes away. You are not going to hear a love story here - this market does not appeal to me. I am a very short-term renter of this long position, at best. My trailing stop is so tight, a mouse will not fit through. I just plain out do not trust any of this! My position is small, but will grow if 1380 - 1400 is taken out with a bang. I want the bears to bleed and scream foul in the process. I want a total bull domination and a complete backing of economic numbers, Q2 earnings, and other important fundamentals and technicals. Guess what? I do not expect any of that (probably the reason why SPX is climbing higher). All I think this latest rally is - a perceived end of Eurogeddon and a QE3 front running.

Yet I do not want to argue with the tape here. For whatever reason - the market is going up, and dragging me up with it. At least I have my charts to thank for being on the correct side. Meanwhile, reports like yesterday's ISM Mfg Index will give me a major heartburn. Reluctant long I will remain, until... to be updated.

Happy 4th of July to my American readers!

Monday, July 2, 2012

Not a big surprise

Today's ISM release is not a big surprise due to poor regional mfg surveys released in June. Philly Fed, especially, gave us heads up on June 21st. Surprise or not - U.S. manufacturing recorded its first contraction in 3 years. If this becomes a trend, stock market will suffer. Prolonged manufacturing contraction leads to recession. This index is to be watched closely and with great trepidation.

click on chart to enlarge