Wednesday, November 9, 2016

TRUMP WINS

Now let's get back to work.  For those who have been paying attention to the market, it's been a long, drawn-out, flat market.  When President Barrack Obama met with Federal Reserve Chairman, Janet Yellen, some months ago, although no notes were taken ;-), it seemed pretty obvious that the message was 'don't rock the boat' until after the election.

The market called Trump's victory well before the electorate did.  Equity Markets plunged limit down when I tuned in, around 1:30 am Central Time.  Obviously, the market saw the impossible occurring.  Within the next hour, the verdict was in.

Futures have since eased up and the "black swan" effect that many predicted, should Trump win, has not yet occurred.  Precious metals continue to be up strong.

As reported months ago, there was no reason to be posting any further until after the election.

At long last, it is history.  It's back to work now with new analysis.  The Status Que is no more.  Will Trump take the Federal Reserve out of the game and let the markets trade freely?  Without back door play by the Central Banks to keep the markets propped up?

Good things to come if you are a trader.  Perhaps the markets will go through their cycles and they are meant to.

New update and outlook ahead this weekend.  Stay tuned.

Saturday, July 9, 2016

Jobs Data Delights All

STOCKS SURGE

The Bureau of Labor Statistics (BLS) reported employment gains far exceeding even the most bullish expectations Friday.  Preliminary numbers indicate that payroll employment increased by 287,000 in June.  US stocks climbed to highs on the news with the Standard and Poors 500 index closing at 2,129.90.



BONDS SURGE

US Bonds surged to all time highs Friday on BLS reports that the number of unemployed individuals in the US increased by 347,000.  The Unemployment Rate advanced 0.2% to 4.9%.

The 30 Year Bond Yield Index (TYX) closed at 21.10 (2.11%).  Levels not seen before.  Exchange Traded Fund (ETF) TLT, an easy way to trade bonds on the stock market, closed at an all time high of 143.60.



PRECIOUS METALS HIT MULTI-YEAR HIGHS

Not to be left out of the party, precious metals, although they sold off initially when the employment news was released, quickly reversed and closed at multi-year highs.


SLV, one of the ways to trade silver on the stock market,  ended the week at 19.22, up $0.48 or 2.6%.


All in all, most things did well with the exception of European and Latin American stocks and commodities (not including precious metals).




This all comes as no surprise.  As mentioned last week, the jobs number didn't really matter.  Central banks, unable to get any kind of inflation going, are desperate to stimulate the economies and continue to print more and more currencies in an effort to do so.  It's not really working but the extra added juice sure does some good stuff to the markets.

For a few years now, I've been accumulating physical gold and silver even as I watched prices fall, seemingly forever.  It's not easy for most people to look at physical things like precious metal bullion coins and not think of them in terms of their worth in dollars.  The trick in the understanding is to realize that since 2008/2009, the Federal Reserve has increased the money they have created from around $800 billion to over $4 trillion, nearly a five time increase.  Local banks, through the fractional reserve system, create additional multiples of this amount.  When you understand how much new money has been created and then consider that there is absolutely nothing that backs this currency, a prudent person would be thinking "I've got to turn this worthless currency into a hard asset as soon as I can."


A CHART TO THINK UPON

As I am always talking about gold and silver to people, the one thing I hear all the time is, what good is it?  You can't eat it.  They can't conceive that the US Dollar could be as vulnerable to devaluation as the Russian Ruble or the Mexican Peso.  The truth is, any paper currency is only worth what others accept it to be worth.  If a dollar crisis were to occur, something similar to what continues to be happening in Greece, one needs some form of money to transact daily business with.  Who knows how it can or will play out.


Throughout much of civilization, silver has been used as a currency and perhaps someday, it will again.  If it were today, and the stock market was priced in silver, this is how it would look.

So while the stock market may be going up and even making new all time highs, remember, when we are looking at price charts of the market, it is soaring based on purchases made with paper money that has no real value.  It was created from nothing, with no assets backing it up and is being used in unlimited quantities to keep pushing stock prices higher.  But the stock market, when priced in terms of something that has an intrinsic value, like silver, is in a Bear Market.


BONDS (TLT) PRICED IN GOLD (GLD)


Looking at bonds in terms of gold, this is breaking down as well.

Don't let surging markets influence your buying decisions, Central Bankers can create the illusion they wish to create.  If we do our homework, we can catch a glimpse of reality.


Saturday, July 2, 2016

Markets Soar


Markets surged this week, quickly rebounding from last week's sudden melt-down after the UK populace voted to leave the European Union.  While US markets fared well, with the Dow and SPX rising more than 3%, bigger gains came in most European shares.  Latin America shares also outperformed.

The star of the week though was Silver, which soared 11% on the week.  Silver also starred on the monthly returns list, rising 17%.

Notice the stellar year-to-date returns for Silver and silver and gold mining shares, Silver Wheaton (up 99.5% on the year) and Barrick Gold (up 200% on the year).


STOCKS REBOUND


Surprise, surprise!  Another V-shaped rebound.  Just look at past attempts of the market to sell off.  Each time, markets quickly rebounded and climbed back to the highs.  It was clearly evident last week when after the Brexit vote, it was immediately announced that the ECB (Euopean Central Bank) would add 250 Billion Euros to shore up the system.  I.e., more quantitative easing.  Other central banks also added that they were at the ready to print more money.

I had recently provided a story about how the hacker group Anonymous had hacked into Federal Reeserve systems and found that the Fed owned more than 50% of many large US corporations.  I have seen no additional news regarding this nor had Anonymous, to my knowledge, released the files that showed this.  Yet it's not surprising that The US Federal Reserve would be buying stocks to "stabilize" the market.  Other central banks have released information showing their US stock holdings so why wouldn't the US be in the lead on this?  Even if the US Federal Reserve is not holding large stock positions, other Central Banks are and of course, they are too "SYSTEMATICALLY" important to allow their assets to fall.

Well, perhaps this game is over.  And the sudden surge in SILVER could be the evidence.

SILVER SURGES


The breakout in silver was as unexpected as ever.  Many have suggested that the prices of gold and silver have been manipulated in the futures markets where institutions sell futures contracts to artificially suppress prices.  This can be easily accomplished in the futures markets since seldom does delivery of the actual physical commodity occur.  And, should anyone actually try to corner the market and buy more silver and gold than is available for delivery, the contracts may be settled in cash.  As a result, the laws of supply and demand go out the window since supply can be created just like our paper money is created, with a key stroke.  There is nothing real that supports it.

It will be interesting to see how far the silver rally can go.  Many have felt that silver and gold prices were suppressed so that people would continue to have faith in the paper fiat currencies that we use.  Surging metals prices would indicate that people are losing confidence in the fiat system

So where might silver go?


This chart is a weekly chart of paper silver (SLV) if you wish to trade it.  We can see the multi-year selloff after a big run-up.  Included in this chart are Fibonacci retracement lines.  After a move, traders often refer to these Fibonacci retracement levels to project where price might go.  Common retracement levels are 38%, 50% and 62%.  There could still be some decent trading profits to be made should these projections play out.

Then what?  Some believe that prices will then fall back and even hit new lows.  They believe that we will be experiencing a long period of deflation, similar to Japan, whose economy has stagnated for 20 years already.  Others believe that the massive amounts of money printing that have occurred will cause hyperinflation.  Perhaps we are already seeing signs of that in the food we buy.  Hey, even prominent fast-food burger joints are using "sawdust" as filler in their burgers.  Certainly my 1/2 gallons of ice cream are no longer 1/2 gallons and even my one pound package of hot dogs are now shrinking to 12 ounces, although the price remains the same as the one pound package (in better days).

The government cannot show that there is inflation as this would result in higher interest rates, higher social security payments, etc.  With the US debt at $19 trillion, interest rate shocks would certainly cause a lot of pain for the government (and taxpayers).

The deflation story also used debt levels as a cause.  We've all learned early on that when you borrow money to buy something today, you are borrowing from the future.  In the future, you will have to pay back the loan.  So with governments borrowing so heavily these days, we are consuming today what we would have in the future.  Therefore, there will be little growth.  Another cause for deflation is demographics.  As the populations of many developed countries decline and the birth rates slow, spending cycles will decline.  That makes sense.  If we build enough houses to suit the baby boomers, when they die off, will there be enough people to sell these houses to?  Not if the future generations are smaller than the previous ones.  I think that this might be one of the reasons why the government is so pro-immigration, even if it is not done legally.  We need more people here to be working and paying taxes to support the social security, medicare and other benefits to the elderly, who are living longer than ever.

Whatever happens, I believe that the massive amounts of money printing that have taken place over the years provide reason enough to be an aggressive buyer of precious metals.

WHAT ABOUT STOCKS?



Looking at the totality of the market move since 2009, we can see that if markets are topping now, the Fibonnaci retracement levels show the potential for pretty good downside moves.  Again, we are talking 38%, 50% and 62%.  Such moves are unheard of for many people but these are normal market moves.  Could it happen?  Yes.  Will it happen?  ???  Someday.

While we have made a huge move, a move that has been largely supported by central banks around the globe printing more and more money in an attempt to make their economies more competitive.  It is truly a house of cards.  But even as I say that and continue to position myself for a major move down, it's possible that the game can continue with higher prices still.  This past week, the European Central Bank indicated that it would continue to print even more money and buy securities in the European markets.  Japan is all in on this and many suspect that even in the US, the next move by the Federal Reserve will be to lower interest rates and do more quantitative easing.  Certainly this will catapult market prices even higher.  Where else can the banks go with the money in a world of negative interest rates.



As mentioned last week, I was eying EWL, a Swiss stock fund, at 28.  I bought it there and it nicely rebounded along with other European stocks.



I also jumped on Royal Dutch Shell (RDS.B)  Wanted to get a piece of the oil game.  Both did well on the week.


Next week, we will get the jobs numbers on Friday.  They tend to be meaningless.  If they are weak, it will just support the current thought that interest rates will continue to go lower, even negative, in the near future.  This will cause stocks, bonds and precious metals to continue rallying.  Bad News is Good News.  And even if the jobs numbers are good, the feeling is that the Federal Reserve will use the turmoil in Europe as a reason not to raise interest rates this year.

So might as well play the game for as long as it lasts.

Saturday, June 25, 2016

OK, You Voted Your Desires, Now Get Back "In Line"

Friday's dramatic market moves are totally baffling considering that the Brexit vote, which markets had been trading off of for days now, is really irrelevant. 

It wasn't too long ago that the same thing happened in Greece.  The people had a chance to break away from the bondage of the EU and ECB and voted for it.  Now their punishment for disobedience has only increased.  When will they ever learn?

I can't believe that the UK will ever have the opportunity to break away from the EU and the power behind the curtain.  Consider that to even begin taking steps to move forward in this direction, it will have to wait for three months until David Cameron resigns as the UK PM and someone new comes in.  THEN, they will have TWO YEARS to put things into motion.  And then how much longer after that to establish the actual dissolution?  I doubt if I will even be alive then to see it, should it actually occur.

In the end, the bankers always win.  Even as the markets were being rattled, what was happening behind the scenes?  Central bankers were nimbly creating billions and billions more of fiat currency to provide liquidity in the event of margin calls.  And with interest rates very close to 0%, it's no problem to just go to the reservoir and borrow more free money to cover your losses.  After all, even if the markets should continue crashing, it's almost a certainty that the famous V-shaped recovery will again come in to save the day. 

So I can't see any real reason why the markets would crash, unless the powers behind the scenes Will It.  The UK vote is Non-binding.  It's just one of those "bones" us minions are thrown every now and then to appease us.  Even here in the US, the recent Primary season let us know the truth.  Voters don't nominate a candidate, the party does. 

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For the week, US stocks were down slightly and remain negative for the year.  European stocks, generally represented with EAF, was down 5%.  A closer look at country funds within the EU showed considerable damage to the weaker members, Italy and Spain. 

Precious metals again rose but as I had mentioned in other social media outlets last week, Silver looked to be hitting resistance.  I expect it to trade between 15 and 17 on SLV, offering some trading opportunities for those who have been accumulating positions at lower levels.  As prices surged above 17 on Friday, I sold some 17.5 call options in July.  Price couldn't hold the 17 level and fell back. 


The 15-17 trade range is clearly seen here.  Often, trading patterns are symmetrical.  We can see that the SLV price traded between 17 and 15 from September to the following June, nine months.  If we continue this pattern, it's possible to see silver trade sideways until early next year! 

But with the printing of hundreds of billions more dollars and Euros, and the potential for QE 4 in the US, I'm only selling options on 10-15% of my total position. I will be aggressively adding more physical silver and SLV to my portfolio as we test the rising trend lines.

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We can see the dramatic fall in price on Friday, and on big volume.  We have to wait and see what happens starting Sunday night when the SP futures open up, along with foreign markets.

It could be that the rally from early February was just a rebound from the big move down that we saw at the end of the year and now we could be headed down further.




Many are predicting a big move down but I'm not so sure.  The weekly chart shows that we just coiled sideways after rebounding from the Jan lows.  Normally, this type of action is very bullish and I would buy the trendline. 

I did sell some of my position in SDS (this is an Exchange Traded Fund that moves up 2% for each 1% that the SPX moves down).  But I only sold about 20%.

I added to the "bearish" position on Wednesday when I read in ZeroHedge the reason why the odds on the Brexit vote changed so much.

It appeared that after one British politician was assassinated, the atmosphere about the UK leaving had changed and that Remain was taking charge.  This was spotlighted with massive coverage of the Odds.  Apparently, there is big time betting there on political outcomes.  Suddenly the odds had changed, in favor of remain.  Markets across the globe began rallying and the US market came within a heartbeat of new ALL TIME HIGHS!  but a closer read into the ODDS which appeared to be driving the market showed that 75% of the bets made were for LEAVE while only 25% of the bets were for REMAIN!  Those that were betting REMAIN were betting big!  Big enough to considerably change the odds.  But unfortunately, when it comes to voting, the vote of one rich man equals the vote of one regular guy (at least in theory).  THOSE DOGS I exclaimed, they are rigging the markets by reshaping to odds.  I immediately increased my Bearish position.

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So I might do a little buying should the markets continue to tank next week.  I was looking at some of these European Exchange Traded Funds (ETF).  I get it that fundamentals have been deteriorating for years now.  I think that the markets have every reason to go lower, even by 30% or more, and that wouldn't be abnormal.

I'm interested in EWL, the ETF that covers Switzerland.


I want to see if it holds this 80 month trendline at 28.  It pays a 5.6% dividend.

We shall see how the markets play out in the coming weeks.  On one hand, I see that any violent sell off will be quickly bid up.  There's no doubt in my mind that Central Banks around the world are big owners of stocks in the US market.  This has more or less made the US stock market TOO BIG TO FAIL.  Central Banks just have too much skin in the game at this point.  If the markets really fell to where they should be, currency systems around the world would become insolvent with only gold and silver benefitting.

So with that in mind, I'll be picking up bargains, if I see any.  Good luck.  Should be exciting times coming.  But in the end, remember, it's all fiction.  If the UK does leave, it won't happen for at least another 4 years.

Saturday, June 11, 2016

Lower Rates Stop Working - What's Next?

Stocks around the world declined this past week, led by European shares.  US shares, despite joining in the sell-off on Friday, declined only slightly.


As mentioned last week, Silver was looking like it was ready to pop and sure enough, it did, rising more than 5% this week.


More European bond buying by the ECB appeared to be the stimulus for the sell-off.  They will begin buying corporate bonds in a continuing effort to stimulate the economy.

In the past, more free money boosted stocks but over time, the effects have been less and less.  This week, a typical European market looked like this:


More Central Bank meetings coming up next week, including one with the US Federal Reserve Bank.  What can be said about that?  Doesn't really matter what Janet Yellen says, computer trading programs react to any comment with buy programs boosting prices back up to the highs.  Usually the volume is so light that it leaves many scratching their heads.

Don't have the precise info in front of me, but reports have shown that Hedge Funds and Major Banks have been net sellers for the past 18 weeks, yet US stocks continue to hover close to the highs.  WHO'S BUYING?  is the big question.  Can't say that I actually know, but as mentioned last week, it had been reported that the group Anonymous hacked into the Federal Reserve trading accounts and found that it is the Fed that is accumulating massive positions in an effort to keep the markets up.  Other reports have speculated that should European markets continue lower, the ECB will be buying stocks aggressively.


It's wonderful when you "have money to burn."

We may never know until it's too late but if the Central Banks are truly buying stocks with money created out of thin air, can equities really have a value?

It is a bit disturbing if one considers the consequences.



CONTINUED LOW INTEREST RATES

There was a time when there was a correlation between interest rates and the stock market.  I first started blogging about it in 2005 when rates started moving lower while the market moved higher.

It got pretty crazy there for awhile but then rates and the markets did come back together and in a hurry!


Isn't it interesting that the SP 500 dropped dramatically to match up with the interest rate?  Notice the very strong correlation between the two until external forces began trying to repeal the market cycle.

"So where are we today?" you might ask.


It certainly looks very "discomforting."  Notice that rates are even lower now than when the market melted down in 2008-2009.

It seems to be understood that there will be "pain" when interest rates rise.  How much pain is hard to say.  Those who do not consider the fall out that will occur when rates do rise may suffer substantially.

While Central Banks fight the good fight to get things moving again, nothing really has seemed to work.  Many who study the world demographics will attest to the fact that many important populations around the globe are aging and are not spending at high enough levels to stimulate the economy.  Business formation continues to decline as increasing levels of regulation add to the cost burden of starting a business.  Yet just sitting on low interest rates much longer will have horrible consequences.  As we've seen recently, pension funds cannot operate in a zero interest rate world.  I read that the Teamster's pension amounts will have to be lowered to just $35 for each year worked, meaning that a worker who had put in 30 years will only be getting $1,000 a month in pension benefits.  Good luck with that!  Insurance companies cannot honor their obligations either.


INTERESTING TIMES AHEAD

As mentioned, the Fed will be meeting this week and then next week, the long awaited Brexit vote.  I can only ask, "what difference does it make?"  Not long ago, Greece held a vote to escape the clutches of the European Union and voted to exit.  What did the government do?  Nothing.

UK can vote to exit, but it won't matter.  The game will play on until one morning we wake up with the news.  GAME OVER!

Saturday, June 4, 2016

The Charade Continues

I marveled at the markets this past week or so as prices on the Standard and Poor's 500 and other major indexes JUST WON'T GO DOWN!! 

It was almost humorous to see the big opening moves down each day over the past week and then see prices climb back for the rest of the day.


While I don't know for sure, it was reported last week that Anonymous hacked into the Federal Reserve trading accounts and discovered that the Fed owns more than 50% of many major corporations. 

https://www.superstation95.com/index.php/world/1384

Would anyone really be surprised?  I mean people who watch and study the market closely, not the average guy.  Most of us who have been involved in markets for 30 years or more see that nothing works anymore.  No level of technical or fundamental analysis works.  The markets reflect the activities of the central banks, to include the Federal Reserve's Plunge Protection Team (PPT) and their crony's the High Frequency Traders.  Many believe that Citadel is actually a pseudo-extension of the Federal Reserve.  And the game extends to our national elected officials who not too long ago rejected a bill that would prohibit them from buying stocks on the knowledge they have (i.e., insider trading).  For sure, why would they cook the golden goose?

So for my part, I have maintained a position in SDS and have more or less ignored it for quite awhile now.  We are back to the low points where I had done my last accumulations but have chosen to buy no more.  It is my contention that the Federal Reserve and their agents will keep the markets up at least until the election in November.  This seemed to have been confirmed when US President Barack Obama met privately with Federal Reserve Chairman Janet Yellen.  Of course no notes were taken of the meeting.  One can only guess what the President and Chairman might be discussing. 

WHERE DO WE TURN?

Well, all is not lost.  A review of the markets to date shows the following:


It's clear to see that Silver and Gold have been the standouts this year.  And of course, it only makes sense with world central banks continuing to print more money to monetize debt.  I recall reading that some $10 trillion in sovereign debt now carries negative interest rates.  How unfortunate it is for us minions that we can't take on more debt and get paid for doing it.  It would be like being promised free gasoline if you buy a new car.  Imagine.

So paper currency is really worthless.  After all interest rates do reflect the cost of money and there is no cost.  Think about that when you are slaving away at your job and for what?  You get paid in worthless fiat currency.  What a delusion.  So for a few years now, I have been mindlessly buying physical gold and silver.  I do so with pleasure as I can't wait to unload the worthless fiat currency.  I have thoroughly brainwashed myself in this truth.  If I believe it, then it must be true, right?

Well I do have something solid that for the millennia has held value.  And I do love the idea that these precious metals were forged in the fires of some exploding super nova gazillions of years ago.  Also that all of the gold that was ever mined is still in existence today.  Who knows who could have handled some of the gold?  Perhaps Alexander the Great or Jesus?  Who can say?  It lasts forever.

So I could continue on about the value of hard assets that include real estate as well, but living in Illinois and even worse, Cook County, both virtually bankrupt entities, property taxes can and will grow to the sky to the point that the governments will eventually seize all properties due to tax delinquencies.  Imagine that, the Fed will own all the mortgages and the governments will be fighting for the title.  Anyway, I digress.

I do favor silver at this point and here are some charts to justify my thoughts.



This chart shows the Exchange Traded Fund that reflects the value of silver.  The price here is a little less than the actual physical silver because, well let's face it, this price reflects a digital entry or paper certificate.  Theoretically, there is supposed to be the actual commodity backing it, theoretically.  So it costs less than the actual stuff you can put in your pocket.  And rightfully so.  Gee, am I feeling cynical this morning?

It does appear that we have had a nice bounce after several years of downward movement.  Keep in mind that real buyers of precious metals feel that price is irrelevant since paper money has no intrinsic value at all.  Anyway, for those who do like to buy low and sell high, Silver has made a strong move up and the 20 week moving average is now trending higher.  The trend is your friend.


GOLD SILVER RATIO


For a long time now, for as bad as gold has been, silver has been even worse!  The chart above shows the gold/silver ratio.  Gold has been almost 80 times more valuable than silver!  This is extremely abnormal since silver and gold are mined together with a ratio of 15 ounces of silver to one ounce of gold.  By recent historical levels, one would expect a gold/silver ratio of about 30.  It got up to 80!

The chart shows that this ratio has broken down some and rebounded, but only to the moving average.  Let's see if it continues breaking down, as it should.


SP500/SILVER RATIO


This chart too is starting to break down meaning that silver is starting to outperform stocks.  This is a no brainer as we saw in the table that silver is up 18% on the year while stocks are just managing to keep their heads above water.

Could be that silver will continue to be the big winner, besting both stocks and gold.

A word of caution though, if you do buy physical precious metals, be sure to keep them close at hand and not in a bank safety deposit box.  If currencies do collapse (think of Venezuela, Argentina, Greece, Cyrus, etc.) you will not be able to get into the bank to access your valuables. 
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Bottom Line:  I'm curious to see if I'm right and the markets do stay up until the election.  This would go to prove just how rigged the system really is.

Saturday, May 7, 2016

Three Week Test of High Next Week



As expected, markets closed down again for the second week in a row, setting up an anticipated topping formation, a three week test of the recent highs.

Should we fail this test of the high, expect some Central Bank to come out and goose the markets again.

They'll do everything that they can to keep it going until the system collapses.







As the table shows, it appears that the world might be in line with this thought.  Silver and gold continue to be the big winners on the year.  Can you guess why?

The move to the precious metals is the obvious conclusion in the world of manipulated paper assets.
 

Sunday, April 17, 2016

Resistance Is Futile



The market moved ever higher this week, breaking through, what was expected to be, the final line of resistance. 

Volume continues to decline and my technical indicators also show that technical momentum is not there to support higher prices.

Assuming that nothing goes up forever, I'll continue holding my SDS position (two time inverse S&P 500).  Fortunately, my accounts are being saved by long positions in gold, silver and gold stocks.  The rise in these assets seem to verify the continuation of easy money in the markets and the increased potential for a much lower dollar and inflation.

In the end, you can't fight the Fed.  And just this past week, Fed Chairman Yellen met with President Obama and Vice President Biden.  What they discussed was not revealed.  Other Central Bankers were on the move, meeting in high level meetings.  Lots of news that has not been accentuated:  Puerto Rico debt, Austria Bank debt, big banks failing to provide workable living wills.

Lots of potentially disturbing news out there but the market rally has gone on far too long, despite lots of negative news in between.  In the end, if the Fed wants the markets to go up, they will go up, no matter what.  It's my guess that the markets will maintain at least until November.

Seeing how I already shot my bullets claiming a top, and now have been proven wrong, I will work on other more rewarding activities.  I expect this will be my last post for the year unless something interesting develops.


Wednesday, April 6, 2016

The Top is In !!

 


Surely you are laughing at the headline, The Top Is In!!!  But in my work, it's worthy of adding to my Two Time down position on the SP 500 (ticker SDS). 

Failed three period tests normally indicate a top or bottom but in this crazy world of Fed manipulation, can anyone actually make an accurate prediction?

Sure, the guys (and gals) working at the Fed trading desks.

But today's action, a sharp rise that occurred when one of the Fed Presidents, Bullard, famous for several previous Fed rallies, got on tv and jawboned the market.  Don't quite know what he said as that's not as important as the SP failing to take out the high set three days ago.

Supporting my call is declining momentum in the 20 day moving average.

 
 


This indicator actually provided me with a great buying entry point.  Notice the underline at the three period test of the low.  Now we see, that while the moving average is still positive, it is now losing steam and a significant down day would push it back into negative territory.
 
A review of other world markets show that many of them are already down significantly from recent rally highs.  Just the US continues to maintain so well.  Whether it is because the US is the cleanest dirty shirt in the hamper?  Or if it's Fed manipulation?  Or what?  It's no secret that corporate earnings will be down this year and even GDP will be lucky to eke out a positive number. 
 
Oh yah, the market looks out six months ahead.  So if you believe this market, you can be expecting nice raises and great job offers allowing you to cash in on the growing economy.
 
Well, if you don't agree with that, perhaps it's time to lighten up significantly on stocks.  The next move down is sure to be a doozy.  Don't leave your accounts unprotected.

Wednesday, March 30, 2016

Goal Seek Mission Continues



Nothing new to add from my last post.  The goal-seek to the channel line continues after Fed confirms what many have been thinking all along - The Economy S#cks and that a return to zero interest rates or more QE might be coming.

Momentum is picking up here but will it break through the downward sloping channel and make new highs?  A review of other markets around the world suggests - NOT.

Sunday, March 20, 2016

Stocks "Goal-Seek" Channel Top


Stocks continued to advance for the fifth straight week.  The Dow Industrials led the way moving ahead 2% on the week.  SPY, the ETF that replicates the Standard and Poor's 500, appears to have lagged but when adding back the $0.80 price reduction for ex-dividend day on Friday, it managed to advance 1.2% overall last week.

In my last post, I suggested that we might be seeing a top as 1) the 202-204 price gap on SPY was being filled and 2) some price derivative indicators where giving signs that a reversal might occur.  Yet the market continued onward.  From closing lows, marked on February 11, the Dow has advanced 12% and the SP has advanced 11.76%.  Gold and silver have done nothing in that same period and 10-year and 20-year government notes/bonds, as reflected in IEF and TLT, have posted negative returns.  For the year, Gold and Silver have led the charge while stocks continue to post negative year-to-date returns.


Price on the SPY appears to be dead set in reaching the upper channel line as illustrated above.  The move however defies my momentum indicators which show the price should begin reversing.


The chart above is the weekly measurement of the Size of a 20-da standard deviation.  As price rises, one needs to stay with the trend as price is rising faster than the moving average.  When Size reverses, the generally indicates that it's time to exit the move.  I can't recall ever seeing a Size chart that looks like this though.  Size generally is cyclical and doesn't show waves higher or lower as we see in recent weeks.

For those who follow waves, the recent series of A-B-C down and now an A-B-C up, might be of some significance.  In the end, it just goes to show that nothing works forever.  But keep in mind, I developed this method back in 1988 and it seemed to have worked well for almost 30 years.  So the dynamics of the markets are changing.  It is no longer a secret that Central Banks are now active in the world equity markets.  High Frequency Trading, Spoofing, low volume and other elements really make it hard to be in the market any longer.  Rather unfortunate. 

Another chart that needs to be seen is the weekly standard deviation chart.


This chart has been respecting the upper trend line but now we are right at the top.  Will it break out?  Not sure, without further analysis of that specific indicator. 

I could say that it is more evidence that we are topping, but in this new world of continued low rates in the US and negative rates elsewhere, the free money must continue to find a home and the US is the best place, or so it seems.

Still, as mentioned in my last post, I added some SDS (double SP short) to my account and will stand pat as we test the 207 channel.  Not sure what I will do then.  Quite frankly, I grow bored with these one-way markets.  Five weeks now more or less just in one direction, zzzzzz.

Best of luck in your trading.

Wednesday, March 16, 2016

Signs of a Top

Stocks managed to continue higher but how long can this last?  Recent daily market action has shown that the market has been opening up lower but then working its way back up to close higher.

What is significant about that?  Well, the market is much different than it was years ago but in the old days, some 40 years ago, there were Specialists on the floor whose job it was to make a market when there was no buyers or sellers.  These players were no different than Sears or any other retail merchandising operation.  They buy low and sell high.  Some would say that they even manipulated the markets and would orchestrate big rallies and sell offs.  So the thinking would go, if the intention was to take the market lower, and they accumulated a volume of stock on these initial declines, they wouldn't want to be holding this inventory as they took prices lower.

Thus, the rallies to distribute stock until their inventory is depleted and they can begin short selling the stock.  What is important is that they are clearing out these price levels so that they can drop prices much lower without having to accumulate much inventory.

So while the game may be different now, the market action reminds me of this archaic process and thus, my caution flags are raised.

Other factors also provide clues to the top.


The market may have filled the gap today and if not exactly, any move above today's high will definitely invite selling.  This was the first price objective I was looking for and it appears that it is complete.

Another, not so obvious, sign is the chart of the 20 day standard deviation.


Here I see a FAILED three day test of the high on the indicator.  Although price made a higher high, the standard deviation appears to have topped.  Today!

Finally, the chart of the change in the moving average has started to break down.


My bullish call started when this indicator made a successful three day test of the low.  The line illustrating this bottom is still in place.  Now, we are breaking through the moving average after reaching high levels reached during the last rally.

Needless to say, this rally has gone longer and further than most have imagined but by now, the shorts are getting shaken severely.  Another factor possibly hurting the shorts in the SPY instrument is that it goes ex-dividend on Friday so tomorrow might see some short covering, especially in the options market as those with in-the-money short calls will be forced to deliver the stock.

Should this occur early, I will be buying some SDS, this is a 2X down instrument for the Standard and Poor's 500 index.  For every 1% the index goes down, SDS goes down 2%.

Tough calling a top here as the market as been steadily rising, but the evidence provided here leads me to believe the time might be right for a decline.  If higher prices continue, then 207 for SPY would be the next target.

Saturday, March 12, 2016

Rally Continues


Stocks continued advancing this week with SPY rallying above 202.  There has been little to add to my previous commentaries as it appeared that the next two price objectives would be closing the gap that is seen between the 202 and 204 price points.


The gap appears at the start of the down move, at the beginning of 2016.

Could be that once that gap fills, the market might begin retracing the recent up move.


The next price level would be seen at 207.  That would provide major resistance as the daily close price channel appears to be well defined with the upper limit confined at the 207 level.

Tuesday, March 1, 2016

Huge Upside Day for Stocks


Big day in the market today with prices surging over 2%, across the board.

As mentioned last time, it appeared that SPY could surge as high as 207, another 9 points but there is some strong resistance overhead.


As seen here, there is apparent resistance around 200.  Should SPY surge beyond that, there is yet another target before 207.


Notice the "gap" from 202 to 204 occurring when the downtrend began.  This would be a likely "next" target should price break above 200.  Definite point to position yourself for some downside move.  Hard to say how low the next downtrend will go.

This could merely be a very sharp rally in a bear market, as many are predicting.  As we know though, when too many are calling for the same outcome, the masses are usually wrong.  I was very skeptical when sentiment turned bearish so quickly.  That got me thinking that we could possibly go to all time highs.  Anything is possible. 

Sunday, February 28, 2016

Market Rally Continues


The market continued rebounding this week with major averages rallying briskly.  SPY closed up more than 3 points on the week, 1.6%.  Gold eased slightly but silver melted down more than 4%.


I mentioned last week that the 20 day average could provide support on the downside and that is exactly what we saw.  The market dropped to the 190 level but then immediately reversed and began the next move up.

While the market turned down on Friday, it does appear that this action was merely testing the breakout level of a possible reverse head and shoulders chart formation.


While my line drawing is crude, it does appear that on Thursday, price closed above the line connecting recent highs.  This line had previously served as a resistance level but on Friday, it proved to be support.  If this is true, then one can expect price to continue rising about 12 more points, or up to 207 on the SPY.

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WEEKLY VIEW


The weekly bar chart shows price continuing to rise to the trend line.  The Stochastics indicator on the bottom of the chart shows that momentum continues sharply to the upside, indicating further positive price movement.

One of my derivative charts also lends support to the continuation of upward price movement.


This chart reveals the weekly change in the 20 week moving average.  If you see where I drew the red line, observe a three week test of a low point in this indicator, implying that next week, the indicator will move higher possibly into positive territory, meaning that the moving average, after falling since last August, will now be rising!  Is it the start of something bigger?

Most everyone is on board for a continued move down.  At the moment, the only indicator that I have that shows that the downtrend might resume is the Size indicator, or my measurement of volatility.


As mentioned, the rule is, as Size increases, stay with the trend.  But as mentioned above, the trend might turn as soon as next week.

Fact is, I've never seen size this large.  My current weekly data covers some four to five years.  While the number, 8.31, is the largest, in percentage terms, Size as a percentage of price, is starting to go down.  Two weeks ago, Size, as a percentage, peaked at 4.35%.  It reversed the following week to 4.29% and this week, it closed at 4.26%.


Here's what that chart looks like.  The previous peak, at 3.69% occurred during the August meltdown last year. 

So as an aside, it's interesting to note that the VIX index, an index of volatility based on option prices, does not reflect this increased volatility.


What does this mean? Imply?  Could be that options are cheap compared to the amount of risk that's currently in the market.

In summary, it looks like prices will continue higher, based on the breakout and test of the inverse head and shoulders formation and the change in moving average graph.