Ok.. Now I know what they are going to do. It seems they intend to continue to do what they have been doing, because the economy is too weak to withdraw their support.
I got it! But I don't think that he committed to a QE3 immediately.
The market was positive most of the day, with a surge on the close, with the DOW closing up 95 and the SPX closing up 8.42. The rest of the major indexes also closed up a similar percentage. On the close, the close,. the SPX, the DJI, the RUT, and the COMP all closed with over bought conditions and negative divergences. Only the Transports closed with decent internals. It appears that the news the market did not want to hear did not get made, so it was time again to ramp the indexes on the close.
Beyond the Fed showboating, there did not seem to be much, if any news today that impacted the markets. One Observation though..... the soft commodities are all down on the close, and the Sugar and the Cotton have broken up trend resistance lines...... and these are the commodities that led the rally off the bottom in 8/2010
I think the SPX wants to trade higher, and I am looking for a place to get long. We will likely get some kind of a pull back on the morrow and I will be looking carefully at how the indexes approach the older resistance, which of course has now become support.
The TLT has been showing good strength and I would like to be a buyer, but I have been burned twice in the past couple of months and don;t want to get burned again. But if the TLT (an ETF that tracks the 10 year to intermediate Treasuries) can stay strong, the will be signaling that the stock market rally is in danger.
Best to Your Trading!
Bill
Wednesday, April 27, 2011
Tuesday, April 26, 2011
Running the Shorts!
It looks this morning like another trend day, with the Dow up 70 and the SP up 8.30 as this is written. I feels like the 1334 level has been cleared and is now headed for next resistance level. Higher.
This break out is not unexpected......and Momentum Change indicators generated a Buy signal last week. But with the action in the SPY, the Q's, the IWM, and former Bull market darling Copper, I felt it was prudent to wait and see what happens at 1334. As of 10:50, the SPX is at 1345.26 and has broken the resistance level with authority. We will likely get trend day, with a close higher than it is currently trading. My trading strategy is to wait for a pull back, testing the 1334 level from above and to get long at that point. Tomorrow is a likely candidate for the testing action.
In the meantime, Gold and Silver are having their first little sell off in a couple of weeks, with Gold at 1499 and silver at 45.23. Oil is a little better this morning, trading 112.40 and Brent at 124.12, while copper modestly improved at 4.328. Of course the big play continues to be the Dollar, today under 74 at 73.87 and the Euro higher at 1.4629. Bonds were mixed on the open, but have improved, with the 10 year Note trading up 1/8 at 3.345% and the Long Bond trading 1/2 higher at 4.426. Is anyone else noting the divergence from the normal trading correlations Bonds higher, Dollar lower, Stocks higher?. The second day in a row? At new recovery highs in the Dow and the SPX?
I am sure someone smarter than I who can offer an explanation. If the carry trade in Dollars is being unwound as is suggested in many quarters, and if the Chinese are selling Treasuries, you would think the Dollar would be up and the Treasuries down.
Case Shiller reports today that the Housing index is at 139.27, one tick off the low 4/2009 at 139.26, and is the 6th month in a row with a decline in housing prices. The Richmond Fed today and the Dallas Fed yesterday report that Manufacturing has turned sharply lower, with continued increases in prices paid, while prices received continue flat. The margin squeeze that has long been predicted is finally showing up in the data. It should not be long before consensus earnings estimates will begun to be reduced. At that point, either P/E ratios have to expand, or prices have to fall. Take your pick as to the likely market response.
Pimco is out this morning with another essay on the Quantitative Easing process and how that process has impacted the economy. Zerohedge has a great review of the report, which calls QE2 a Ponzi scheme that is "nothing by a profit illusion". It really is must reading!
Ok, it is time to find a place to get long this market. I am looking for a test of the breakout.. and will make some recommendations at that time. Maybe even this afternoon. It is clear in hindsight that I should have bought the market when the buy signal was first generated, but frankly, I did not like the market mechanics at the time. (always easier to know what you should have done).
Best to your trading!
Bill
This break out is not unexpected......and Momentum Change indicators generated a Buy signal last week. But with the action in the SPY, the Q's, the IWM, and former Bull market darling Copper, I felt it was prudent to wait and see what happens at 1334. As of 10:50, the SPX is at 1345.26 and has broken the resistance level with authority. We will likely get trend day, with a close higher than it is currently trading. My trading strategy is to wait for a pull back, testing the 1334 level from above and to get long at that point. Tomorrow is a likely candidate for the testing action.
In the meantime, Gold and Silver are having their first little sell off in a couple of weeks, with Gold at 1499 and silver at 45.23. Oil is a little better this morning, trading 112.40 and Brent at 124.12, while copper modestly improved at 4.328. Of course the big play continues to be the Dollar, today under 74 at 73.87 and the Euro higher at 1.4629. Bonds were mixed on the open, but have improved, with the 10 year Note trading up 1/8 at 3.345% and the Long Bond trading 1/2 higher at 4.426. Is anyone else noting the divergence from the normal trading correlations Bonds higher, Dollar lower, Stocks higher?. The second day in a row? At new recovery highs in the Dow and the SPX?
I am sure someone smarter than I who can offer an explanation. If the carry trade in Dollars is being unwound as is suggested in many quarters, and if the Chinese are selling Treasuries, you would think the Dollar would be up and the Treasuries down.
Case Shiller reports today that the Housing index is at 139.27, one tick off the low 4/2009 at 139.26, and is the 6th month in a row with a decline in housing prices. The Richmond Fed today and the Dallas Fed yesterday report that Manufacturing has turned sharply lower, with continued increases in prices paid, while prices received continue flat. The margin squeeze that has long been predicted is finally showing up in the data. It should not be long before consensus earnings estimates will begun to be reduced. At that point, either P/E ratios have to expand, or prices have to fall. Take your pick as to the likely market response.
Pimco is out this morning with another essay on the Quantitative Easing process and how that process has impacted the economy. Zerohedge has a great review of the report, which calls QE2 a Ponzi scheme that is "nothing by a profit illusion". It really is must reading!
Ok, it is time to find a place to get long this market. I am looking for a test of the breakout.. and will make some recommendations at that time. Maybe even this afternoon. It is clear in hindsight that I should have bought the market when the buy signal was first generated, but frankly, I did not like the market mechanics at the time. (always easier to know what you should have done).
Best to your trading!
Bill
Monday, April 25, 2011
What I am looking at.
I meant to get this out on Sunday, but ran out of time. I wanted to present a few charts that I think demonstrate the CAUTION at this 1334 level that I think is appropriate.
The 15 minute for the Q's shows significant negative divergence in the MFI, the RSI and the MACD, plus of course the 2 big gap opens,
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The 15 minute SPY shows the same negative divergences and large gap opens.
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This is chart that surprises me...the negative divergence in the NYUD Advance/Decline volume, which typically, not always, appears prior to decline.
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There is also negative divergence in the McClelland.
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It also occured in 8/2010 and signaled the Fed to initiate QE2. But what ever it is saying, the one thing that can not be ignored is that it signals a decline in confidence in the largest market, the Bond Market.
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Bill
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