Tag Archives: es

Another move up?

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Maybe today’s the day that tips the balance from confident bears to confident bulls. It’s what we need to reset the pendullum to get on with this drop. I was short from 1098 last night to 1089 this morning, where I reversed the position (which makes me flat, on account of a healthy long-term put portfolio):

Source: Interactive Brokers

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I also went LONG some silver this AM, since it’s tested and held at the $16 level. Would be nice to see some risk appetite come back to gold and silver and to see some more decline in the dollar. I’m the biggest dollar bull anywhere, but a continued ascent from here without more of a set-back just feels too easy.

Choppy & toppy

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Here’s a 6-month shot of the S&P500 futures:

Source: Interactive Brokers

Looks like another good short set-up here, using a couple of points over today’s high as a stop and 1055 as a target (with much greater bearish potential of course). Like many bears, I’ve been expecting the 2009 rally to peter out since summertime, and I’ve been continually surprised by the stock-buying public’s recklessness, delusion and plain stupidity as evidenced by a PE ratio well over 100 in the face of 10%+ unemployment, shrinking credit, and accelerating foreclosures and bank failures.

That said, the market since summer has given us a series of fairly clear short-term sell signals and has obeyed them with a series of 4-6% declines. Unlike previous rallies that powered through resistance into solid new highs, the rally since the latest interim bottom (November 1-2) has stalled out well within the price range of the previous top (mid-October). Not only that, but the distribution (choppy) pattern within this three-week plateau has exhibited a much wider range than previous ones. Might this instability indicate a pending phase shift, such as when a top gets wobbly before toppling over?

Oil

I want to show some basic charting here with crude, which is supposedly falling because of the supply report today, an explanation that I consider hogwash. Rather, the chart offers some examples of a very simple sell signal: the broken trendline. Yesterday’s signal was classic: it broke a very clear uptrend at a couple of different degrees, attempted a re-test, then fell hard.

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Here in the 2-day view you can see the smaller trend and how its break lead to the break of the larger one:

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This reminds me of last week’s mini stock panic, which was supposedly because of Dubai World. Funny thing is, as EWI noted, stock futures made their high a few hours after Dubai made its announcement.

Line in the sand

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S&P 500 e-mini futures, including overnight trading, 1-month view, 1-hour bar:

Interactive Brokers

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The story here is that nothing is confirmed yet. The megaphone pattern (expanding upward wedge) hasn’t been busted, so we could still make a new high here, though the strength of such an advance should be weak. Each leg up for the past several weeks has sported weaker internals, such as a lower advance/decline ratio.

Based on internals, sentiment indictors and the action in other asset classes, I think the top was made about 10 days ago, but you never know. Don’t get caught in a bear trap.

By the way, this is what a busted megaphone looks like (Eurostoxx 50, 1 month chart):

Key markets pushing resistance levels

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US equities, the VIX, oil and copper are bucking against price levels associated with multiple peaks and troughs over the last month. The levels are as follows:

July copper: resistance at $2.32 – 2.35

August oil: resistance at $70 – 71 (BTW, I have been stopped out here and am on the sidelines)

NASDAQ futures (NQ): resistance at 1470-1480

S&P 500 futures (ES): resistance at 915 – 925

VIX: support at 27

These markets are looking short-term toppy, but a push through here would be bullish. Every time the VIX has dropped to 27 it has snapped back up, oscillating around the 30 level for the past 5 weeks. Today’s action should go a long way towards relieving the oversold condition (OTM put spreads, low TICK) that we observed earlier this week).

Divergent action today

It is noteable that bonds are holding onto very nice gains and even pushing higher today, that the dollar is well off its lows, and that precious metals are languishing. We have an unresolved market here. I believe that the bond market is generally the most prescient, so unless treasuries get on board and sell off hard, I’m holding onto most of my reflation-trade shorts with relatively tight stops (with the exception of the CHF short — yesterday’s crash on manipulation news provided a nice exit — I’ll reenter if we get a bounce, as with GBP).