28 February 2010

28 FEB 2010, Sunday


  1. Above chart from John Hussman (http://www.hussmanfunds.com/rsi/yieldsinflation.htm).  It plots the historical monthly Volatility of Inflation (consumer price index) against the Price / Earnings ratio of the stock market.
  2. Basically, higher inflation volatility tends to create investor uncertainty which leads them to reduce (sell) stock exposure resulting in lower stock prices (P/E ratio).  Makes sense right?  Heck, if you blur your vision a little you'll see that the relattionship tends to behave in a well contained "L" type curve.
  3. But six data points stand out as unusual (even if they weren't colored red).  And those points just happen to be the most recent 6 months of data.  
  4. I only post this as another demonstration of how we are not in normal times at all.  Those "errant data points" indicate a sort of "No Man's Land".  Perhaps indicative of the past 2 years of FED pumping???  Interesting!
  5. This weekend I mulled over a lot and I think it largely comes down to the answer to this question, "Which will be the influence on our economy going forward for the foreseeable future: deflation or inflation?"  The answer (and timing) holds the key to investment success over the next 5-7 years.
  6. Many think inflation because:  1) the Fed has printed a ton of money and 2) we always have inflation when that happens...no?  Yes, it has worked that way for most of our memories but that is definitely not the way it always works.  Sometimes, unforeseen shocks can overwhelm situations that would ordinarily have very predictable outcomes.  For example: what if the Greece implodes and the Euro is perceived as in jeopardy...enough so that people seeking safety rush into the US Dollar.  Pssst....stronger dollar is not inflationary.  Who knows...just an example.
  7. At the risk of saying "this time's different"...I still lean toward deflation.  Reasons:  1) credit expansion / loans were not backed by true value only "hoped for" value, 2) loans on banks books are currently underwater and will get worse (FED/Congress bought time but things have gotten worse), 3) deteriorating banks will seek to maintain loss reserves which will prevent them from lending to anyone except the US Treasury (now you know who's buying all the bonds...you are or at least your bank is with your money), 4) individual consumers and businesses don't want to borrow even if they could right now due to economic uncertainty and current debt servicing burdens, 5) taxpayers will not support additional federal stimulus and 6) states / municipalities can't print money, will no longer pray for federal stimulus and instead will actually have to cut spending or raise taxes but both take money out of the system. 
  8. As "in system" credit shrinks there is less money and fewer buyers willing to bid for assets.  Prices have nothing left to do but fall...eventually seeking a level at which buyers are sufficiently interested to bid aggressively enough to finally put a price floor in.
  9. Just a thought for a Sunday.
  10. As to current action...choppy, sloppy go nowhere week (click the SP500 1Yr Daily on sidebar).
  11. But at least we have some tighter pivots to watch at 1112 and 1086.  Let's see what happens this week.  

27 February 2010

27 FEB 2010, Saturday


  1. Well...they're up to it again.  The Securities and Exchange Comission (SEC) is out to "Get Shorty" again.  
  2. Heck, you know they've got to paint the shorts as evil vice the failed companies that are on the road to oblivion (those poor hapless victims like Enron, Worldcom, Bear Sterns, Merrill Lynch, Countrywide, GM, Chrysler, etc, etc, etc). 
  3. Anyway, a little history first.  Back in JUL 2007, the SEC removed the uptick rule that had been in existence since the 1930's.  This rule required a stock to have an uptick before anyone could sell it which did tend to slow the selling pressures.  Well, when that happened I took notice and asked the obvious, "Why are they doing that?  And, especially, why are they doing that now after 5 years of an up market and we're at all time high's?"  Well, the answer to me was "Da Boyz" had just changed the rules and were getting ready to play a new game.  Now , they could just pile on and submerge a stock with continuous selling.  And play they did!  Da Boyz didn't care about shorts then but....
  4. So then after the market is getting the crap beat out of it in summer 2008, the SEC institutes the "no short sales on financials" ruling.  They were trying to force the shorts to cover and provide upward buying pressure..which didn't really amount to much.  And when the final downward drive in October happened, there were no shorts to cover and provide buying pressure so the market just kept falling until people with titanium steel balls (and pockets as deep as the TARP legislation) said enough and stepped up to buy. 
  5. Well, they just passed a new uptick rule this past week.  In my opinion it's just for show because of the way it's constructed but....It's still a change so I take notice.  Anyway, the rule says no short selling after a stock has gone down 10% in a day.  Kind of stupid because who the heck would short it then?  Most traders would be hesitant and expecting some sort of reaction / bounce to short instead.
  6. The only advantage that this might be to Da Boyz is with regard to the leveraged ETF's which could potentially get all jacked up with tracking errors in a short sale limited straight line fall?  But the inverse leveraged ETF's would be going upward in value so how would that play out?  Don't know...just thinking outta da box. 
  7. The heck with this...it's early Saturday...time to enjoy some weekend!

25 February 2010

25 FEB 2010, Thursday


  1. The after hours nonsense seems to be back...here's an article from late DEC 09 that described its effects last year.  Traps people who held overnight on wrong side and makes it very difficult to get onboard during regular trading hours for fear of getting slapped very hard without warning in a vicious snapback. 
  2. And what do you know about today, big gap down in morning...chopped around very tightly for hours and then late afternoon produced the vicious snapback rally.
  3. Yeah...the market is rigged.  It's unfortunate but the innocent people who are treating the stock market as a "one direction high yield bank account" with their IRA/401K's will be completely disabused of that notion eventually. 

24 February 2010

24 FEB 2010, Wednesday


  1. Above is today's action...for now, price seems to be trapped at the NOV-DEC highs, struggling with the 90 (green) & 50 (red) moving averages and the RSI (purple indicator at bottom) can't get much above 60.
  2. What's interesting is if you look back at the 2007 peak and subsequent action...compare current indicator and moving average configurations to the DEC 2007 time frame.  Do you see what I'm seeing?  Does that time frame look similar to current?  Does to me.  Brief push up past recent highs then rollover in early MAR?  Dunno.
  3. Again, market is playing monkey in the middle and I'm the monkey...could go either way.  Currently, intraday trading.
  4. Blast from the past...In 2005, Democrat Senators rail about how the majority (Republicans) might unjustly use the reconciliation method to bypass the minority.  Wait a minute...wait just one second!!!  So what's different now?  Why have the Democrats flipped on this obviously strongly held principal and are now ready to ramrod healthcare through using reconciliation???   
  5. Sooo...vote for Obama-care....FREE LUNCH FOR EVERYONE!!!  We'll just pass the bill to our kids and grandkids...Freaking priceless and unbelievable.

23 February 2010

23 FEB 2010, Tuesday



  1. Just a reminder...the SP500 1 Yr Daily Chart (in the sidebar at the right) has the same information as above if you don't see a post.  And if there is nothing very different from my last post, I probably won't post.
  2. As described last time, I'm in trader mode because it is pretty unclear right now...meaning, I can see it going either way (despite my preference).  
  3. But for now, closed below the 90DMA which puts me back to selling rallies intraday.  Note: will flip again as necessary.
  4. For longer term traders...something to consider is the potential for a head and shoulders pattern (right shoulder) forming.  If that's the case and it breaks below recent swing lows...projected price would be 920's.
  5. Oh...and this can't be good for or indicative of a healthy economy...  Or this either... The FDIC report comes just two weeks after the bi-partisan Congressional Oversight Panel released a 183 page report that says 2,988 small U.S. banks are about to “get hit by a tidal wave of commercial-real estate loan failures”. That’s approximately 38% of the 8,000 banks in the U.S.
  6. One day at a time.

21 February 2010

21 FEB 2010, Sunday

  1. Uncertain what to expect since; 1) we recently broke swing low pivots, 2) daily closes were below the 90DMA (green) ....both indicating down but then 3) price closed back above the 90DMA and 4) broke upward of the early FEB swing high pivot...one indicates up while the other merely shows side.  The confusion is a big clue which indicates sideways, too.
  2. Sooo...we went from up, to down and now to sideways.  Speaking strictly with regard to market structure...To turn back up, market needs to make higher swing highs and higher swing lows.  To turn back down we need to punch some new swing lows.
  3. Problem is we are right in the middle of a 10% price range between those highs and lows.
  4. When it gets like this, I either sit aside and wait for more information or just day trade.  So, I'll day trade as necessary.
  5. Point is...I'm going to do everything I can to avoid getting dragged to the wrong side of the trade which is exactly what "Da Boyz" want to do so they can spring their trap...but which side?  I'm still leaning toward down but have to be open minded too!
  6. One day at a time.  

19 February 2010

19 FEB 2010, Friday

  1. Very short term overbought with momentum still tending upward.  Been playing intraday because I'm worried about getting my hand slapped and...
  2. After hours yesterday (before Options Expiration), the Federal Reserve raises the discount rate.  Within seconds the market was down 1%.
  3. Yup!  Dat's how dey roll!  Da Boyz are back in town....Da Boyz are back. 
  4. Below...Sustainable??? 

17 February 2010

17 FEB 2010, Wednesday (Part 2)

  1. Zoomed in a little on the chart.  Had to so that you could see today...tiny, tiny, tiny!  Not much movement.
  2. For long term traders...ask yourself one question..."How queasy did that 9% drop make you feel?" If more than you liked, you've recovered half of that drop...perhaps consider lightening up on rallies and sit out for a little while.
  3. Nothing changes from yesterday...we're at somewhat of a "fork in the road" in my mind. I will be alert to whichever way it wants to go and be prepared to flip as quickly as necessary.

17 FEB 2010, Wednesday


  1. Above pic demonstrates my point from last night's post on how nothing has been fixed and it will take a long time.  In fact, alot longer than the average person can even imagine.
  2. The graph above is from an economics study of massive credit contractions throughout history and across all countries worldwide (if you want to read the report I can probably dig it up).  The writers of the study found a common pattern across all instances and arrived at the above "road map" to recovery. 
  3. It's just one of the reasons I'm not buying into the "we're back on track" bullshirt.
  4. For example...sure seems to me that we just had the rally.  No?
  5. Below is just a reminder of long term history.  The bad news is that we may have a ways to go still in the flat to down "red" window.  The good news is that folks my age may get one of those multi year booms to aid retirement funding...when we need it.

16 February 2010

16 FEB 2010, Tuesday



  1. Good size upmove...right up into the NOV-DEC range lows, the early FEB pivot high and challenging the 90DMA (green) from underneath and 50DMA (red) still above price. 
  2. Things can change fast...both ways.  For example; bearish sentiment rose quickly during the recent swoon.  Was it a shakeout?  Dunno...only future price tells the tale.  You only know what has happened and make your best guess of what might happen.
  3. The move down from JAN, broke pivots and made lower lows.  Will this rally result in a lower high?  Technically, the rally could retrace a large part of the downmove and then rollover to place a lower high.  It could also stop in the current vicinity.
  4. Sooo, with uncertainty what it is...I intend to be very nimble and trade, as necessary.  MAR 09 and on was filled with non-stop upside surprises with a large portion of the up moves happening in the overnight trading (ie, massive screw job by Da Boyz...please don't do it in reverse).  I remember that and as the Who sang, "I won't get fooled again."  Instead, I will stay with the flow as best I can even if that means flipping sides quickly while Ms Market tries to sort this out.
  5. My biggest problem is that I don't believe that any of the problems that caused the OCT 07 - MAR 09 down move have been fixed.  If anything, it's been made worse despite markets "broadcasting" that all is well.  I, personally, think it's an illusion.  BUT, there's always a but, it does make the major point that the market does not necessarily reflect economic fundamentals.  They can disconnect and you have to trade the market you have or be willing to stand aside...period.
  6. Below, for giggles, is a chart of the early 1970's move compared to current action. 

 

15 February 2010

15 FEB 2010, Monday

  1. Markets closed on Monday for holiday.
  2. Tough call.  Daily has worked off its oversold while the weekly still points down.
  3. Times like these...I'm happy to be able to trade the intra-day moves.  That way I can follow price whichever way it wants to go.
  4. OK...so when forced I still lean toward more downside (below the 90DMA) but still leary of bounces...1085-1095???  Or rollover here?  Tough...Da Boyz do their work well, indeed.
  5. One day at a time.

14 February 2010

14 FEB 2010, Sunday

  1. Happy Valentines Day...tell those you love most what they mean to you!
  2. It's all that matters in the end.

09 February 2010

9 FEB 2010, Tuesday


  1. Daily closes below 90DMA (green) lean me toward selling rallies intraday while looking for 2-7 day rallies to potentially position short for a swing trade.  (For example; dips in bull markets, the RSI (purple indicator line) tends to find support between 40-50...while rallies in bear markets, the RSI tends to find resistance in the 50-60 area.  Just guidelines but additional clues as to environment.)
  2. As mentioned in previous posts, weak action...bounces are next to nothing right now.  But, intraday, even those tiny bounces relieve oversold  temporarily and allow for further downside.  Currently, behaving like the MAR rally...only in reverse.  Sure hope that crap ends.  Still thinking some bounce more likely but ya never know...thus I'll stick to intraday for now.  Recent 60 minute chart below for grins.
  3. While waiting....trying to remind myself...One day at a time.

07 February 2010

7 FEB 2010, Super Bowl Sunday


  1. First and foremost...Congratulations to the New Orleans Saints for their tremendous upset victory.  I think about 85% of the country thought they'd lose but wanted them to win...I was among that crowd.
  2. Soooo...Who Dat?!!
  3. Chart below...tough to call near term direction after that late Friday recovery.  Could just as easily bounce a quick 2-3% as fall the same.  Small bounce is probably more likely in my opinion.
  4. But, overall, I'm trying to look for opportunities in sync with the intermediate term which seems to be down.  This was my failing during the upmove...didn't trust the pump job, resisted the intermediate trend (IT) and, in doing so, just made it way more work (ie, daily trading) than it needed to be.  So, right now, I'll be watching for reasonable 2-7 day rallies to short.
  5. However...always a but...current scenario slightly resembles the JUL-AUG 07 drop which briefly turned the IT down and then price rallied (turning IT back up) for 2 months to a slightly higher high...the ultimate high...in OCT 07.  Just trying to stay alert to all possibilities and why I follow with...
  6. One day at a time!  Trying to stay in tune with the flow.

04 February 2010

4 FEB 2010, Thursday

  1. So, last evening my computer goes down.  Well, the monitor anyway. 
  2. Oh well...got a new monitor once my son returned from school today but talk about a bad day to be out of business when in short mode.  The way it goes.
  3. Anyway, was surprised to see today down as hard as it was...thought we'd see a little more short squeeze then we got.  News on European sovereign debt was overnight news and then increased unemployment claims this morning.
  4. Wednesday, seemed like there was a lot of HFT action going on...still wondering if Da Boyz take this down like they took it up.  Who knows...One day at a time. 
  5. Just an updated chart below.

02 February 2010

2 FEB 2010, Tuesday

  1. Comments on chart...click it.

01 February 2010

1 FEB 2010, Monday



  1. My fear...the consequence of complacency will be catastrophe.  Cheney said, "Reagan proved that budget deficits don't matter."  What an idiot!  I'm afraid that all politicians are clinging desperately to that concept with all the hope of their political futures.  However, the thing they miss is that the overall debt loads way back then were so much smaller than they are now.  These are different times requiring a different approach.
  2. Here's an alternative...A Roadmap for America's Future.  Submitted for your consideration!