SP 500 Technical Chart review (revisited)
Thought I might include portions of a post I placed today on the TZA thread because I think it clearly explains what the market is facing right now.
Pay particular attention to the SPX Weekly chart with 100 Week MA and the MACD indicator, current and past and how the market has reacted after the Weekly MACD has gone negative on the weekly chart.
*********************
We'll also need to look for a reverse H&S formation developing, as it did at the previous March, 2009 low.
For the SPX to avoid forming a reverse H&S reversal pattern, we need it to break previous lows.
SP 500 weekly chart w/100 week MA
As you can see from the above weekly chart, the SPX got rejected EXACTLY at the 100 Week MA with a shooting star candlestick (inverted hammer). That's not good.
Candlestick charting reference
It also put in the 3rd upside prong of a revised downward channel for Technicians to draw channel lines through.
And if you look at that chart from that 10 year perspective, it resembles a HUGE BEAR FLAG.
Bear Flag chart formation
But most importantly, look at the Weekly MACD. It's negative.. So backtest the chart and look for previous instances where the market has suddenly rallied to the upside and pulled that weekly MACD back to the positive WITHOUT A MAJOR PLUNGE OCCURRING FIRST..
Can't find any? Neither could I.
Look again.. Use "All data" as Time period.
Still can't find any? Neither could I.
It's clear that when the SPX Weekly MACD breaks to the negative, it has ALWAYS plunged to clear oversold conditions PRIOR to any recovery.
EDIT: I just reviewed this article from DecisionPoint.com (see my link list). They have issued a long-term sell signal on the markets:
DecisionPoint issues long-term sell signal
4-Year Cycle Ambiguity
Stay long this market at your own financial risk. Go to cash and wait for the "Smart/Big Money" to come back in and support the markets as they did in March, 2009.
Or if you're patient enough and can handle the volatility of the inverse market ETFs, buy a position in them to profit from the market turmoil.
Scrutinizer
Saturday, July 17, 2010
Friday, July 16, 2010
Federal Reserve minutes warn US economy won't recover for 5 more years
Here's one of these little tidbits that most Americans don't read in an American newspaper, or hear being uttered from our President's (or any banker's) mouth on Sunday Morning talk shows.
The Fed minutes warned of "significant downside risks" and a possible slide into deflation, an admission that zero interest rates, $1.75 trillion of QE, and a fiscal deficit above 10pc of GDP have so far failed to lift the economy out of a structural slump.
"The Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably," it said. The economy might not regain its "longer-run path" until 2016.
"The Fed is throwing in the towel," said Gabriel Stein, of Lombard Street Research. "They are preparing to start QE again. This was predictable because the M3 broad money supply has been contracting for months."
Fed admits economy likely won't recover until 2016
Regular readers of this blog will recall that I posted a chart on M3 money supply declining at a rate not seen since the Great Depression. They would have been forewarned that this is a clear sign of de-leveraging, including folks getting "debt free" and others defaulting on their credit cards and mortgages.
I posted the following link on June 1st, 2010:
M3 collapsing at 1930's rate
We must all recall that debt equates to money supply. The money we deposit into our banks accounts are actually loans to that bank. They turn around and re-lend it to other borrowers at a 9:1 ratio. Simplistically stated, they loan out up to $9 for every $1 in deposits, betting that the majority of those extra loans will not default. So.. for every $1 in your account, $9 more dollars are added to the money supply.
However, when loans start defaulting, or consumer demand for borrowing diminishes (either due to lack of creditworthiness, or just lack of demand), those banks have to pay interest on deposits with less interest revenue from the remaining loans they have extended. And when loans default, they have to write them off and pay out from remaining interest revenue.
All of this results in the destruction of money supply, and usually price deflation due to ebbing consumer demand. Additionally, there is a "velocity" of monetary transactions factor that is often not considered. It's determined by the number of times a $1 exchanges hands in a business transaction. The slower the velocity of transactions, the lower goes the Gross Domestic Product of the Economy. People saving too much out of fear of, or expectation of future declining prices decreases our GDP. Banks worried that collateral will depreciate below loan value will either require more collateral, or refuse to loan.
Think of the economy and money supply as a wind sock that has to have a constant flow of air through to remain pointed in a horizontal direction. If the wind ebbs, the windsock will go limp..
That's why that Consumer Confidence Number is so danged important. If the consumer is not buying, they aren't taking out loans (decreasing money supply), or spending cash (decreasing velocity). Supply and demand dictate that both must remain in balance. Reduce demand and excess will need to be liquidated at discount prices. The TRUE problem will be when supply is reduced and pent up consumer demand then creates inflationary pressures.
But for now, we're looking at deflationary pressures as the primary threat. Deflation is FAR MORE DIFFICULT TO RESOLVE than inflation is. It's easier to reduce demand by raising rates than it is to increase demand from masses of unemployed and fearful people who've suddenly rediscovered the merits of frugality and living debt free.
I am currently debt free with $$$$ in the bank and my brokerage account.. Are you?
Scrutinizer
Here's one of these little tidbits that most Americans don't read in an American newspaper, or hear being uttered from our President's (or any banker's) mouth on Sunday Morning talk shows.
The Fed minutes warned of "significant downside risks" and a possible slide into deflation, an admission that zero interest rates, $1.75 trillion of QE, and a fiscal deficit above 10pc of GDP have so far failed to lift the economy out of a structural slump.
"The Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably," it said. The economy might not regain its "longer-run path" until 2016.
"The Fed is throwing in the towel," said Gabriel Stein, of Lombard Street Research. "They are preparing to start QE again. This was predictable because the M3 broad money supply has been contracting for months."
Fed admits economy likely won't recover until 2016
Regular readers of this blog will recall that I posted a chart on M3 money supply declining at a rate not seen since the Great Depression. They would have been forewarned that this is a clear sign of de-leveraging, including folks getting "debt free" and others defaulting on their credit cards and mortgages.
I posted the following link on June 1st, 2010:
M3 collapsing at 1930's rate
We must all recall that debt equates to money supply. The money we deposit into our banks accounts are actually loans to that bank. They turn around and re-lend it to other borrowers at a 9:1 ratio. Simplistically stated, they loan out up to $9 for every $1 in deposits, betting that the majority of those extra loans will not default. So.. for every $1 in your account, $9 more dollars are added to the money supply.
However, when loans start defaulting, or consumer demand for borrowing diminishes (either due to lack of creditworthiness, or just lack of demand), those banks have to pay interest on deposits with less interest revenue from the remaining loans they have extended. And when loans default, they have to write them off and pay out from remaining interest revenue.
All of this results in the destruction of money supply, and usually price deflation due to ebbing consumer demand. Additionally, there is a "velocity" of monetary transactions factor that is often not considered. It's determined by the number of times a $1 exchanges hands in a business transaction. The slower the velocity of transactions, the lower goes the Gross Domestic Product of the Economy. People saving too much out of fear of, or expectation of future declining prices decreases our GDP. Banks worried that collateral will depreciate below loan value will either require more collateral, or refuse to loan.
Think of the economy and money supply as a wind sock that has to have a constant flow of air through to remain pointed in a horizontal direction. If the wind ebbs, the windsock will go limp..
That's why that Consumer Confidence Number is so danged important. If the consumer is not buying, they aren't taking out loans (decreasing money supply), or spending cash (decreasing velocity). Supply and demand dictate that both must remain in balance. Reduce demand and excess will need to be liquidated at discount prices. The TRUE problem will be when supply is reduced and pent up consumer demand then creates inflationary pressures.
But for now, we're looking at deflationary pressures as the primary threat. Deflation is FAR MORE DIFFICULT TO RESOLVE than inflation is. It's easier to reduce demand by raising rates than it is to increase demand from masses of unemployed and fearful people who've suddenly rediscovered the merits of frugality and living debt free.
I am currently debt free with $$$$ in the bank and my brokerage account.. Are you?
Scrutinizer
Consumer Confidence PLUMMETS 10 points from June report
Consumer Confidence
This is a TERRIBLE REPORT!! It's down almost 10 points from the previous report, which is equivalent to falling off a cliff.
It's ALSO the lowest level for the year, and a full 3 points lower than the PREVIOUS LOW in April. In fact, it's the lowest since August, 2009!!
What will next month's report look like? I suggest it will be even lower.
And if that wasn't bad enough, ECRI economic data has ALSO PLUNGED to within .02% of previous levels that have clearly predicted a recession. That's where the fear of a "double-dip" is gaining ground.. And a DD recession is just a politically correct way of saying "DEPRESSION".
ECRI Growth to -9.8%
It's clear.. "Joe Six Pack" is feeling the pain of prolonged unemployment, loss of unemployment benefits, and increasing foreclosures. Small businesses, who make up a large percentage of the US economy, are not hiring at nearly the rates necessary to bring down unemployment. They are hampered in obtaining credit, while "Big Business" is hoarding cash.
So while we're in the midst of earnings seasons, the market is a forward projecting mechanism. It's all well and good that the last quarter may have been good for profits, but what is Corporate America going to do for an encore?
There's a reason corporations are hoarding cash and why banks are not lending. They see more economic downside in the future and they are preparing their "war chest" in order to survive and take advantage of it.
Banks are hoarding cash so they can appear to be the strongest contender for taking over any insolvent competitors that the FDIC takes down. Why extend risky loans against depreciating collateral to grow their business when they can wait for their insolvent competitors to go belly up and then take over their branch offices as well as all their depositors. They know FDIC will pick up the bad loans.
This is killing small businesss...
As for the market read... I'm short via Ultra-Bear ETFs, and will remain that way for the foreseeable future based upon this plunge in consumer confidence, as well as expectations for even worse in the next report.
And now I'm worried about another "Flash Crash" as well. This market is thinly traded and if no one but the computers are buying stock, we're in serious trouble going forward.
But Goldman Sachs would apparently disagree with me. They assert that the S&P is still going to 1300 by the end of the year. I'm not sure what fundamental data they are basing this on, but it certainly can't be on Consumer Confidence data:
S&P going to 1300?
Feds with nothing better to do than raid private entrepreneurial farms
Here's an article where the government's assault on small business impacts even the small time farmer's markets and small farmers:
Feds raid "food clubs"
Now I don't know about you, but I like raw milk. I used to work at a dairy lab owned by some family friends when I was younger and they would receive raw milk from local dairymen.. It's awesome!! And it's the way our parents, and grandparents drank raw milk prior to homogenizing, and pasteurization. Our forebears also ate free-range chickens as well as their eggs. My Aunt use to have her own hen house and the eggs were always fresh.
I find this rather shocking that Law Enforcement has the resources to conduct these raids on agricultural entrepreneurs, but can't manage to deal with illegal immigration. If some of these clubs are not in compliance with regulations, they should work with them to achieve proper compliance, not conduct these ridiculous and treating them as if they were major crimes.
Scrutinizer
Consumer Confidence
This is a TERRIBLE REPORT!! It's down almost 10 points from the previous report, which is equivalent to falling off a cliff.
It's ALSO the lowest level for the year, and a full 3 points lower than the PREVIOUS LOW in April. In fact, it's the lowest since August, 2009!!
What will next month's report look like? I suggest it will be even lower.
And if that wasn't bad enough, ECRI economic data has ALSO PLUNGED to within .02% of previous levels that have clearly predicted a recession. That's where the fear of a "double-dip" is gaining ground.. And a DD recession is just a politically correct way of saying "DEPRESSION".
ECRI Growth to -9.8%
It's clear.. "Joe Six Pack" is feeling the pain of prolonged unemployment, loss of unemployment benefits, and increasing foreclosures. Small businesses, who make up a large percentage of the US economy, are not hiring at nearly the rates necessary to bring down unemployment. They are hampered in obtaining credit, while "Big Business" is hoarding cash.
So while we're in the midst of earnings seasons, the market is a forward projecting mechanism. It's all well and good that the last quarter may have been good for profits, but what is Corporate America going to do for an encore?
There's a reason corporations are hoarding cash and why banks are not lending. They see more economic downside in the future and they are preparing their "war chest" in order to survive and take advantage of it.
Banks are hoarding cash so they can appear to be the strongest contender for taking over any insolvent competitors that the FDIC takes down. Why extend risky loans against depreciating collateral to grow their business when they can wait for their insolvent competitors to go belly up and then take over their branch offices as well as all their depositors. They know FDIC will pick up the bad loans.
This is killing small businesss...
As for the market read... I'm short via Ultra-Bear ETFs, and will remain that way for the foreseeable future based upon this plunge in consumer confidence, as well as expectations for even worse in the next report.
And now I'm worried about another "Flash Crash" as well. This market is thinly traded and if no one but the computers are buying stock, we're in serious trouble going forward.
But Goldman Sachs would apparently disagree with me. They assert that the S&P is still going to 1300 by the end of the year. I'm not sure what fundamental data they are basing this on, but it certainly can't be on Consumer Confidence data:
S&P going to 1300?
Feds with nothing better to do than raid private entrepreneurial farms
Here's an article where the government's assault on small business impacts even the small time farmer's markets and small farmers:
Feds raid "food clubs"
Now I don't know about you, but I like raw milk. I used to work at a dairy lab owned by some family friends when I was younger and they would receive raw milk from local dairymen.. It's awesome!! And it's the way our parents, and grandparents drank raw milk prior to homogenizing, and pasteurization. Our forebears also ate free-range chickens as well as their eggs. My Aunt use to have her own hen house and the eggs were always fresh.
I find this rather shocking that Law Enforcement has the resources to conduct these raids on agricultural entrepreneurs, but can't manage to deal with illegal immigration. If some of these clubs are not in compliance with regulations, they should work with them to achieve proper compliance, not conduct these ridiculous and treating them as if they were major crimes.
Scrutinizer
Thursday, July 15, 2010
Markets Ready To Sound Retreat??
A couple of videos regarding the market direction for the next few days. We're clearly getting over-bought. It's just a question of what the event will be that incites the sell-off.
Dan Fitzpatrick's market read
One disturbing aspect for Dan's TA read, is that the channel he indicates as next support is lower than the previous one. That could, potentially, induce the H&S sell-off that has been so expected.
PSA market read
And this very informative article comparing now to the market crash of 1929-1930:
Daryl Guppy's market read
Scrutinizer
A couple of videos regarding the market direction for the next few days. We're clearly getting over-bought. It's just a question of what the event will be that incites the sell-off.
Dan Fitzpatrick's market read
One disturbing aspect for Dan's TA read, is that the channel he indicates as next support is lower than the previous one. That could, potentially, induce the H&S sell-off that has been so expected.
PSA market read
And this very informative article comparing now to the market crash of 1929-1930:
Daryl Guppy's market read
Scrutinizer
Wednesday, July 14, 2010
Will 2011 Capital Gains Tax changes put a nail in the US stock market?
There has been some discussion going around about how the 2011 Capital Gains tax increases will impact market performance into the fall.
Since 2008, individuals in the two lowest tax brackets paid 0 percent long-term capital gains tax while everyone else paid 15 percent. In 2011, individuals in the lowest tax bracket will pay 10 percent while the rest will pay 20 percent.
Additionally, the article goes on to state an interesting strategy that make impact end of year trading choices and make for a nice "January Effect":
One interesting idea for buy-and-hold investors is to sell stock gains at the last possible trading day of 2010 and immediately buy it back in 2011. By doing so, investors can lock in existing gains at a lower capital gains tax rate and still keep the investment.
For example, if the cost basis is $10 and the investor sells it for $20 on the last trading day of 2010, his $10 gain will be taxed at the 2010 rate (which is zero for some lower income individuals). If he immediately buys it back on the first trading day of 2011, he now owns the stock at the new cost basis of $20 (assuming no change in price) and the $10 original gain is forever locked in at the 2010 tax rate.
Capital Gains going up in 2011
Here is a re-post of an interesting chart that was placed in a previous comment (Thanks PPP** for the chart!)
Interesting S&P prediction
Also, I looked at the VIX chart and it's seemingly showing it's ready for a renewed uptrend. Will JP Morgan's earnings tomorrow disappoint?
Daily chart.. insert VXX
I should probably repost an article that discusses JP Morgan's earnings and how it far underperforms what should be expected from a bank with a near trillion dollar balance sheet:
He suggests we not be fooled by recent earnings reports or government stats, pointing to U.S. bank earnings as especially inaccurate. JP Morgan has a balance sheet of $1 trillion and can borrow at essentially zero, he notes. So if they just go out and buy 10-year bonds at 3% they should be able to earn $30 billion a year. Yet the bank announced a profit of $3.3 billion last quarter.
"What does that tell you? It says they are losing money on everything else," Das says. "Strip out the gifts, and it's big net loss." And at big industrial concerns like General Electric, he argues, revenue growth is anemic -- so earnings growth is solely stemming from cost-cutting and layoffs.
Comment on JPM is about 1/2 way into the article
That's about 1/2 of what JPM should be receiving as an annual return were it SOLELY INVESTED in 3% T-bills. Certainly not the sign of a healthy balance sheet.
Anyway.. got some family drama going on right now.. so need to cut this short.. But speaking of "shorts", I'll be looking at re-entering one tomorrow. But again, I'm not yet convinced whether this retracement will lead to the "Big Kahuna".. But review PPP**'s chart and let's see it it prove prophetic.
Scrutinizer
There has been some discussion going around about how the 2011 Capital Gains tax increases will impact market performance into the fall.
Since 2008, individuals in the two lowest tax brackets paid 0 percent long-term capital gains tax while everyone else paid 15 percent. In 2011, individuals in the lowest tax bracket will pay 10 percent while the rest will pay 20 percent.
Additionally, the article goes on to state an interesting strategy that make impact end of year trading choices and make for a nice "January Effect":
One interesting idea for buy-and-hold investors is to sell stock gains at the last possible trading day of 2010 and immediately buy it back in 2011. By doing so, investors can lock in existing gains at a lower capital gains tax rate and still keep the investment.
For example, if the cost basis is $10 and the investor sells it for $20 on the last trading day of 2010, his $10 gain will be taxed at the 2010 rate (which is zero for some lower income individuals). If he immediately buys it back on the first trading day of 2011, he now owns the stock at the new cost basis of $20 (assuming no change in price) and the $10 original gain is forever locked in at the 2010 tax rate.
Capital Gains going up in 2011
Here is a re-post of an interesting chart that was placed in a previous comment (Thanks PPP** for the chart!)
Interesting S&P prediction
Also, I looked at the VIX chart and it's seemingly showing it's ready for a renewed uptrend. Will JP Morgan's earnings tomorrow disappoint?
Daily chart.. insert VXX
I should probably repost an article that discusses JP Morgan's earnings and how it far underperforms what should be expected from a bank with a near trillion dollar balance sheet:
He suggests we not be fooled by recent earnings reports or government stats, pointing to U.S. bank earnings as especially inaccurate. JP Morgan has a balance sheet of $1 trillion and can borrow at essentially zero, he notes. So if they just go out and buy 10-year bonds at 3% they should be able to earn $30 billion a year. Yet the bank announced a profit of $3.3 billion last quarter.
"What does that tell you? It says they are losing money on everything else," Das says. "Strip out the gifts, and it's big net loss." And at big industrial concerns like General Electric, he argues, revenue growth is anemic -- so earnings growth is solely stemming from cost-cutting and layoffs.
Comment on JPM is about 1/2 way into the article
That's about 1/2 of what JPM should be receiving as an annual return were it SOLELY INVESTED in 3% T-bills. Certainly not the sign of a healthy balance sheet.
Anyway.. got some family drama going on right now.. so need to cut this short.. But speaking of "shorts", I'll be looking at re-entering one tomorrow. But again, I'm not yet convinced whether this retracement will lead to the "Big Kahuna".. But review PPP**'s chart and let's see it it prove prophetic.
Scrutinizer
Tuesday, July 13, 2010
To Short or Not to Short, That Is The Question
First off.. Christian at Perfect Stock Alerts offers these insights:
Now is the time to short
Christian has been downright obstinate about his belief that this rally is nothing more than a short-term bear rally that is destined to break down 2200 points to the 8000 level.
Market will decline 2,200 points
Great Depression 2.0
Now, discerning viewers/readers will note that Christian was a bit early on his H&S breakdown (as was I). We have seen a very low-volume rally over the past week, but one that has added some 600 points to the DOW since we broke through "neckline" territory.
But he makes a compelling case on the DOW with that "inverted hammer" after 6 days of upside. But the REAL QUESTION is whether this shorting opportunity will merely take us back to retest the previous low, or will it break down to even lower prices. It's truly been amazing how they have been able to prop up the markets on such low volume. We had the lowest volume on the DOW in over 6 months (someone said a year.. but have to confirm).
I think we're undoubtedly looking at a retest of the previous lows, or at least 1040 on the S&P. If that fails again, I'm would suggest that it's going to confirm that we're looking at a failed Bear Market rally that continues the bear market that commenced in 2008 and bottomed in March, 2009.
So.. back to whether longs should sell tomorrow or Thursday, and whether Shorts should add to positions? Since return OF Capital is paramount over Return ON Capital, combined with the FACT that we're looking at extreme overbought conditions AND A GAP-UP from a previous low, I would suggest taking money off the table.
I'll be looking to resume my shorts tomorrow with anticipation of at least seeing the S&P revisiting 1040, or a nearly 60 point haircut for that index. After that, I'll have to assess the situation and odds of the trade continuing to new lows. But I'll be waiting for the markets reaction to the retail sales report pre-market.
Retail Sales consensus
Economic Calendar
I'm also looking at the Euro/USD as we may be seeing the Euro topping out along it's long term trendline:
EUR/USD
If you insert RSI and Stochastics into the lower indicators, and Bollinger Bands into the upper indicators, then click the "draw trendlines" box, you can draw a line from the top to the current peak.
In the past, when the Euro descends, the dollar climbs and it put downward pressure on the US equities markets.
I'll also be considering global markets in determining the best time to short. Right now it's green across the board in Asia, which is often a leading indicator of how Europe and the US will perform the following trading day.
Global Markets
And as Christian pointed out, the FTSE (London Market) appears to be reaching it's top and may prove a critical indicator for the rest of the global markets.
Also, in my choice of shorts, I'll be looking at the Real Estate and Ultra-Bear Russell 2000 ETFs (DRV, SRS, and TZA respectively), while also looking at the Ultra-bear Banking index (FAZ). BGZ (ultra-bear DOW) may also prove a leading indicator of whether we have a market top.
Ok.. that's all for tonight. Be nimble and preserve your capital.
Scrutinizer
First off.. Christian at Perfect Stock Alerts offers these insights:
Now is the time to short
Christian has been downright obstinate about his belief that this rally is nothing more than a short-term bear rally that is destined to break down 2200 points to the 8000 level.
Market will decline 2,200 points
Great Depression 2.0
Now, discerning viewers/readers will note that Christian was a bit early on his H&S breakdown (as was I). We have seen a very low-volume rally over the past week, but one that has added some 600 points to the DOW since we broke through "neckline" territory.
But he makes a compelling case on the DOW with that "inverted hammer" after 6 days of upside. But the REAL QUESTION is whether this shorting opportunity will merely take us back to retest the previous low, or will it break down to even lower prices. It's truly been amazing how they have been able to prop up the markets on such low volume. We had the lowest volume on the DOW in over 6 months (someone said a year.. but have to confirm).
I think we're undoubtedly looking at a retest of the previous lows, or at least 1040 on the S&P. If that fails again, I'm would suggest that it's going to confirm that we're looking at a failed Bear Market rally that continues the bear market that commenced in 2008 and bottomed in March, 2009.
So.. back to whether longs should sell tomorrow or Thursday, and whether Shorts should add to positions? Since return OF Capital is paramount over Return ON Capital, combined with the FACT that we're looking at extreme overbought conditions AND A GAP-UP from a previous low, I would suggest taking money off the table.
I'll be looking to resume my shorts tomorrow with anticipation of at least seeing the S&P revisiting 1040, or a nearly 60 point haircut for that index. After that, I'll have to assess the situation and odds of the trade continuing to new lows. But I'll be waiting for the markets reaction to the retail sales report pre-market.
Retail Sales consensus
Economic Calendar
I'm also looking at the Euro/USD as we may be seeing the Euro topping out along it's long term trendline:
EUR/USD
If you insert RSI and Stochastics into the lower indicators, and Bollinger Bands into the upper indicators, then click the "draw trendlines" box, you can draw a line from the top to the current peak.
In the past, when the Euro descends, the dollar climbs and it put downward pressure on the US equities markets.
I'll also be considering global markets in determining the best time to short. Right now it's green across the board in Asia, which is often a leading indicator of how Europe and the US will perform the following trading day.
Global Markets
And as Christian pointed out, the FTSE (London Market) appears to be reaching it's top and may prove a critical indicator for the rest of the global markets.
Also, in my choice of shorts, I'll be looking at the Real Estate and Ultra-Bear Russell 2000 ETFs (DRV, SRS, and TZA respectively), while also looking at the Ultra-bear Banking index (FAZ). BGZ (ultra-bear DOW) may also prove a leading indicator of whether we have a market top.
Ok.. that's all for tonight. Be nimble and preserve your capital.
Scrutinizer
Market Rally fueled by BP?
The news seems to be encouraging in the Gulf as BP was able to place a new cap on the spewing wellhead in the gulf. Now they need to shut the valves off and determine whether pressure rises, or escapes from a broken well casing. Many experts have expected that this inner pipe well casing was breached earlier, like a leak in a garden hose, and it's eroding the sea floor around that leak. If true, this would mean the cap would not resolve the leak, but only enable them to collect more oil from the leak, while we wait for the relief well teams to intersect with the well bore.
BP caps well for good?
The question is how much the market will care about this. Will this be sufficient to bring out the buyers, as well as scare the bejeezus out of the shorts, therefore bringing the DOW back up to over 10,600, and the S&P back up over 1220 and mitigating/nullifying this Head & Shoulders formation that recently broke it's "neckline" and triggered a market sell-signal?
Or will this be the opportunity the "bag-holders", who missed the opportunity to sell earlier, are counting on to off-load their portfolios. It all hinges on the above market levels according to Darryl Guppy, a noted Technical Analyst:
Reversing the Head & Shoulders
Right now futures are up 74 points on the DOW, but it's dangerous to believe a pre-market "gap up" as they are usually sold off. I'll personally remain unconvinced we've turned this market direction around, avoiding a breakdown of the previous neckline area until we've hit those levels described by Darryl Guppy as we're currently in serious resistance areas that almost demand a retest of previous lows. Furthermore we're looking at 6 up days, which is generally near the top of most market rallies. PSA's market read from last covers this pretty well:
Low Volume Market rallies fail
We're also in earning season so it may be that this week is the one chance for the Bulls to resume control over the markets as the post-news market is historically weak through August and September as traders take vacations.
Additionally, even though THIS short term H&S formation might become neutralized, we still have that 12 year H&S formation that is going to require some MAJOR work to overcome over the remainder of the year:
Mother Of All Head & Shoulders
Finally.. here's a little tidbit that I thought summarized the sub-prime market crisis and how Federal Stimulus has facilitated placing the burden of this mess on the backs of the taxpayers. It's pretty interesting reading:
Con of the Decade
And if that article isn't bad enough, here we have the Chinese cutting our Credit Rating:
Chinese Pot calling the kettle black?
Yeah.. I know China has tremendous reserves, but the bubble that has been created in the Chinese economy has rendered the majority of their Real Estate loans to be extremely suspect.
As I finished typing this, it seems likely that the gap up in this market will sell off. The question will how far the selling momentum is carried. We'll have to look at retail sales tomorrow morning as an indicator for the status of the US consumer.
Scrutinizer
The news seems to be encouraging in the Gulf as BP was able to place a new cap on the spewing wellhead in the gulf. Now they need to shut the valves off and determine whether pressure rises, or escapes from a broken well casing. Many experts have expected that this inner pipe well casing was breached earlier, like a leak in a garden hose, and it's eroding the sea floor around that leak. If true, this would mean the cap would not resolve the leak, but only enable them to collect more oil from the leak, while we wait for the relief well teams to intersect with the well bore.
BP caps well for good?
The question is how much the market will care about this. Will this be sufficient to bring out the buyers, as well as scare the bejeezus out of the shorts, therefore bringing the DOW back up to over 10,600, and the S&P back up over 1220 and mitigating/nullifying this Head & Shoulders formation that recently broke it's "neckline" and triggered a market sell-signal?
Or will this be the opportunity the "bag-holders", who missed the opportunity to sell earlier, are counting on to off-load their portfolios. It all hinges on the above market levels according to Darryl Guppy, a noted Technical Analyst:
Reversing the Head & Shoulders
Right now futures are up 74 points on the DOW, but it's dangerous to believe a pre-market "gap up" as they are usually sold off. I'll personally remain unconvinced we've turned this market direction around, avoiding a breakdown of the previous neckline area until we've hit those levels described by Darryl Guppy as we're currently in serious resistance areas that almost demand a retest of previous lows. Furthermore we're looking at 6 up days, which is generally near the top of most market rallies. PSA's market read from last covers this pretty well:
Low Volume Market rallies fail
We're also in earning season so it may be that this week is the one chance for the Bulls to resume control over the markets as the post-news market is historically weak through August and September as traders take vacations.
Additionally, even though THIS short term H&S formation might become neutralized, we still have that 12 year H&S formation that is going to require some MAJOR work to overcome over the remainder of the year:
Mother Of All Head & Shoulders
Finally.. here's a little tidbit that I thought summarized the sub-prime market crisis and how Federal Stimulus has facilitated placing the burden of this mess on the backs of the taxpayers. It's pretty interesting reading:
Con of the Decade
And if that article isn't bad enough, here we have the Chinese cutting our Credit Rating:
Chinese Pot calling the kettle black?
Yeah.. I know China has tremendous reserves, but the bubble that has been created in the Chinese economy has rendered the majority of their Real Estate loans to be extremely suspect.
As I finished typing this, it seems likely that the gap up in this market will sell off. The question will how far the selling momentum is carried. We'll have to look at retail sales tomorrow morning as an indicator for the status of the US consumer.
Scrutinizer
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