Is The Market Finally Coupling To Economic Relaity?

Let's start by reminding ourselves that price making a weekly close above SPX 2130 means all conversations about recent volatility are moot since the overall market uptrend will have resumed, to which only an unforeseen economic event or financial collapse will reverse. Meaning, if you are a detached buy and hold investor needing access to retirement income, because the government has killed savings and savers and made us all market speculators, relax. Fundamentally nothing has changed in the fictitious Kenseynian universe of debt stimulus, weak USD, and appreciating risk assets.

What is worth looking at, in my opinion, is market weakness that has prevailed since 20 April, why it has occurred, persisted, and whether it will continue.

SPX Weekly Chart

The first issue, why is has occurred, is simple. There were more sellers at SPX 2111 than buyers. Why the sell off persisted for over two trading weeks is due to the fact that there were enough institutional sellers who have not accepted the not-so-new normal that stock market and economic performance are completely detached from one another.

Addressing the last issue, of whether the market will break into new highs or continue to sell, I am optimistic it will break out in coming weeks and my reasoning, looking at inverse correlating indicators, is as follows.

1. No volatility: 

VIX Daily Chart

2. Low interest rates:

US Ten Year Monthly Chart

3. Rising Commodity Prices:

OIL Weekly Chart

4. The spoiler that's not likely to spoil anything:

DXY Monthly Chart

So, to answer the headline question, no I do not believe the market has coupled to economic reality and likely will not until something cataclysmic and completely unforeseen occurs to realign our Keynesian science fiction universe with financial reality. 

Happy Trading!

Oppose the Puerto Rico Bailout. My Letter To Congress (copy, paste, send)

Dear Representative/Senator         ,

Please do not support any kind of financial bailout or assistant to the foreign country of Puerto Rico.

As the Caribbean version of Greece, Puerto Rico purposely accumulated debt it could never repay believing (wrongly) that its imminent default would be covered by future generations of American taxpayers. Let them sink!

Pumping money into Puerto Rico will start a domino effect of intentional defaults that will hasten the collapse of the entire, already insolvent, US government and economy.

Puerto Rico is a foreign country that should be cut lose by the United States. Their debts are their decision.

It is time for the United States to put an end to idiotic, interventionist foreign policy which only results in the adoption of low IQ nations and all of their social, cultural, and financial problems.

Sincerely,

(Your name)

Markets 28 March - 1 April 2016

Key Metrics:
SPX  -2060
Oil    @$40 pb
DXY +96

VIX  -15

US10Yr +1.90%

FOMC: Chair Yellen speaks 11:30EST Wednesday. Non-Farm Payrolls 08:30EST Friday

Forecast: Continuation of intermediate broad market uptrend with eye on interest rate differentials and USD strength.

Despite recent terror attacks in Brussels and Islamabad we do not see much of a challenge to our ongoing thesis of probable new market highs unless, of course, there is something earth shattering from this Tuesday's Yellen statement, Wednesday's ADP release, or Friday's Non-farm payrolls number. 

Last week we were looking for opportunities to join the broad market intermediate uptrend, which came at the SPX 2025 level, interestingly, on the last trading day of the week before Good Friday. 

I am expecting moves to the upside to continue early in the trading week, this week, to the SPX 2060 level before going quiet ahead of Friday's Non-farm employment release. 

Two charts that are drawing my attention as potential challengers to new highs are the 10 year and the DXY. 

I want to keep a close watch on both of these metrics, as you can be certain the Fed is, because they have the potential to put negative pressure on equity prices as they are inversely correlated to our inflation, consumer, debt-based economy. 

The yield on the 10 year, for example, looks like it is in a position of strength as it continues to challenge 2.00% last week with more veracity than it did the week before last. 

US Ten Year Yield Weekly

The question now becomes who is selling (buying treasuries) at 2.00% and do they have the financial backing to keep yields down? If the answer is, "the Fed" then we know yields could crash here, regardless of technicals. The Fed is simply the most massive personally-vested institution moving markets and a train you, as a trader/investor, want to be riding on and not sitting in front of. 

As for the USD, we fully expected buyers at 95.00 but I am not expecting survival beyond 98.00 with the aforementioned market at current levels.

Happy marketing.

Markets 21 - 25 March 2016

Key Metrics:  

SPX  + 2040 

Oil    @$40 pb

DXY @95

VIX  -14

US10Yr -1.90%

FOMC 'Staying put'
Forecast: Cautious optimism for new market highs.

Last week markets behaved as predicted in our weekly premarket post both before and after the Wednesday FOMC statement which was accommodative due to, according to nine of ten Fed governors, the deflationary energy sector, weak business spending, soft net exports, and risks of global economic instability.

For those, however, still sipping the sauce of monetary policy interventionism I assembled a chart of the Baltic Dry Index (below) to exemplify how impossible it has been for the world's central banks to create demand with debt and inflation. And, yes, we can expect, despite the global downtrend,  more debt, more inflation, and continued shrinking demand unless an Andrew Jackson, or someone like him, becomes President of the United States or head of the European monetary union.

Baltic Dry Index Monthly Chart

This Monday (tomorrow) we will start the trading week looking for pullbacks (selling opportunities) around SPX 2050 - 2055 as low risk entries into the ongoing intermediate uptrend.

Keep in mind that, despite the technical, fundamental, and monetary policy aligning of planets, markets have not resumed the overall, broad market uptrend and will not until breaking through the historical interference between SPX 2060 - 2130.

SPX Weekly: The boundary to pass lined in red

Happy Marketing.

Markets 14 - 18 March 2016

Last Tuesday I said "price action suggests a push trough (SPX) 2000 without retesting 1950." With that move calibrated we can now focus on whether price will break SPX 2110, and resume a broad market uptrend, or get crushed by sellers at 2040 - 2060 and pounded back into bear market territory.

Available technical evidence suggests a struggle (selling opportunities) at  2040 - 2060 for bulls, as bears wait to "prove" their assertions about weak earnings and low single digit GDP growth, but an eventual push through SPX 2110 into new market highs.  

SPX Daily

USD strength, for example, is failing as the DXY looks more poised to test 90 than maintain 96 - 95, assuming there are no abrupt exits from the Euro. In our inflation and debt-based consumer economy US dollar weakness, as demonstrated over the past forty years, boosts stock prices to the detriment of our purchasing power.

DXY Weekly

Accompanying probable US dollar weakness is rising commodity prices. Does the oil chart below look like a picture of weakness to you? If so I'd like to know your reasoning.
 

Oil Monthly

Adding to the bullish outlook is the VIX which, now below 20.00, looks ready to dive deeper into the mid teens.

VIX Daily

Lastly, from the fundamental perspective, there is a perfect storm of uneventful, non-consequential US economic data for the remainder of the month following this Wednesday's predictable FOMC statement. Expect a rosy forecast form a "prepared" FOMC this Wednesday bolstered by positive February Non-farm numbers and ascending risk asset prices.

Happy marketing.

Markets 7 - 11 March 2016

Weeks ago we stated price would test SPX 2000. With that move complete we now shift focus to one of three eventual outcomes; a resumption of the broader market downtrend, a test and rally from 1950, or a push from Monday's close to SPX 2060.

SPX Daily

Evidence from yesterday's price action suggests a push trough 2000, without retesting 1950, to 2040 - 2060 where we can expect a strong showing from sellers.

Be flexible and ready, however, for selling and buying opportunities on your SPX correlated products between 2000 and 1950.

Happy trading.

Market Snapshot Thursday 3 March 2016

Adding strength to our "SPX 2000" theme is the VIX resuming its teen status as the risk averse are dissuaded from insuring falling stock prices.



VIX Daily

The questions now become, will buyers overwhelm sellers at SPX 2000 and 2060, push price into new highs, above 2120, and resume a broad market uptrend?

SPX Daily



Available evidence suggests "yes" assuming risk assets can make peace with their common foes; a stronger US dollar and rising treasury yields.

DXY Daily

US 10 Year (Yield)

Bulls, with the obstacles of SPX 2000 and 2060 to overcome, are not out of the woods yet and can expect a fight from institutions will millions of dollars bet on bear a market.

Happy trading.

Markets 29 Feb - 4 March 2016

We ended last week with optimism for a run at SPX 2000 where we were looking for an early Friday bounce at 1940.

SPX 60M

The issue now is less whether we can participate in the intermediate uptrend to SPX 2000, but whether the current uptrend holds at a level in the vicinity or fails and resumes the broader market and economic downtrend.

SPX 60M

The most compelling argument for a rally and resumption of the intermediate uptrend, if 1930 fails, is SPX 1910 (above chart) as price moving into the 1800s will threaten the upward drive.

Happy trading. 

Markets 26 Feb 16

As the intermediate uptrend continues the broader market has cleared the lane to SPX 2000 where buyers and seller will battle it out for overall trend domination. I am looking sell SPX correlated products at SPX 2000 but, until then, adding to upside entries.

SPX Daily

Expect a challenge to the overall downtrend if SPX 2000 turns out not to be an ambush for buyers. Price closing in on SPX 2130 will hint a resumption of the broad market uptrend.

Happy trading.

Market followup 24 Feb 2016

Although nothing has happened to change the overall downtrend of markets, today provided a massive upside trading opportunity for those with the knowledge to catch it.

S&P Futures 5m 

Nailing moves like this, in the face of overwhelming negative market commentary, truly distinguishes the pros from the majority of industry noise makers.

Midweek Snapshot 24 Feb 2016

So far price action this week has been a lesson for buyers on why not to load up into resistance levels in down markets.

SPX 60M

Although, on Monday, I was looking for a breakout and daily close above 1950 on the SPX I was also very clear no buy orders should be placed until then, upon which a confirmation entry should be used to enter long.

"The question is less 'will price break above 1950' but 'will price allow a safe confirmation entry to buy between today's open and SPX 2000?" -22 Feb 2016

Monday and Tuesday were reminders of how we cannot ignore the weakness of markets which will continue, I expect, unless asset prices decouple from the economy and rally on the desperation of Fed monetary policy.

Markets 22 - 26 Feb 2016

Those with a strong sell bias, who didn't get slapped around hard enough by last week's price action, are waking up this pre-market Monday with some issues to face.

SPX Daily

Considering market confidence buying into Friday's close (last candle on the right) the question, as price presents itself on the above chart, becomes less 'will price break above 1950' but 'will price allow a safe confirmation entry to buy between today's open and SPX 2000?'

VIX Daily

Adding to the stress level of undaunted shorts is the VIX where we see Friday's price slamming into daily support with no buyers, as puts deleverage from the scene, and approach the Fed's "whew!" VIX numbers: teens.

DXY Daily

 What upward markets have yet to reconcile is continued USD strength. Another topic for a future article.

Happy trading.

Market follow up Wednesday, February 17, 2016

Two points of yesterday's thesis survived today's price action. The USD hung in at the 97.00 - 96.00 level while oil rallied but stopped short of penetrating its first daily resistance level.

DXY Daily Chart

Oil Daily Chart

SPX Daily Chart

Buyers, as you can see (above) from virtually zero sellers in three strait days of trading, have been extremely sure of themselves. But indexes have to meet a much higher standard, compared to other products, before we can stop selling rallies and start buying dips. In the case of  SPX that "standard" is a weekly close above 2130; a new record high and resumption of the uptrend.

Considering weak economic fundamentals I think such new highs would have to involve QE, another zero interest rate policy, or both. In other words, I don't see how, at peak supply, something like OPEC claiming to curb production is going to push all asset classes into new highs. What are we, a single resource global economy now?

Question or comment below.

Happy trading.

Market Follow Up

The three assets classes featured in Sunday's post (CL, SPX, DXY) performed, at the open, in conjunction with my pre-market thesis. Oil rallied, the  broad market rallied, and the US dollar rallied.

The question, now, is what will decouple to the downside and what will continue upward? In very particular order I expect Oil and US indexes to falter while the USD moves forward. Let's start with the hated "export-killing, way-to-expensive, overvalued" USD.

DXY Daily Chart

Do you see (above) anything..... peculiar about price action of the USD? Something that stands out and makes you ask, "hey, I wonder why price just couldn't wait one more tic to snap upward without even touching any of those perfect-looking daily DXY support levels?"

That's exactly what I thought, and I'm giving the DXY a green light to the 98/99 level, before retesting 95, where we'll assess price action on arrival.

Regarding Oil and the broader market we need to decide if oil is leading or following.

Oil Daily Chart

Following from the looks of price on the above chart; buying momentum on the SPX is greater. Although there is a support level forming (ellipse) below a resistance level (blue rectangle) I am not a  buyer of oil here. In my book two resistance levels in a down-trending market beat one support level. That's not to say price can't break through, but rules are there for a reason.

SPX Daily Chart

Same deal for the SPX. My read, from the above chart, says sellers have the advantage despite yesterday's strong move to the upside. I will look at longs to 2000 and 2060 if the above resistance zones are taken out but not buying into such levels during a downtrend.

Question or  comment below.

Happy trading.

Markets 16 - 19 Feb 2016

If we're going to, in the context of the market selloff and overall global deleveraging of assets, look for longs at the open of next week's trading session (Monday is a US market holiday), we need to know how much more upside is there in oil.

Oil, after all, is the only green light markets have in an avenue of indicators signaling "bleed."

If you're going to buy anything based on oil, look at buying at the CL 27.60 level but keep in mind you only get one shot. Price rallying to any of the high time frame resistance levels listed on the chart below means 'stop looking for a longs' and be ready to sell at the first sign of price capitulation on a lower time frame chart.

Double dipping levels against a strong trend will transfer your trading capital directly into the account of those on the opposite side of your trades. 

Oil: Weekly Chart

My argument against upside pressure for Oil, beyond 33.00, considers the heft of the selloff, the overall downtrend, and too little shortage of supply. Oh, oil has double bottomed at 26.00? Well, a lot of traders (probably long oil) are mentioning that so let's look at what, exactly, oil double bottomed into.

Oil: Daily Chart with exposed double bottom

 Above we can see the touted double bottom, which has created a trading range between 27.00 and 30.00.

Oil Monthly Chart

On the big daddy monthly chart, however, we see that oil price, converging on 22.00, has not only crushed and refused to rally at the origin of its 2004 breakout, it's pushing into a level where markets took a very long time to decide price should go higher.

Further evidence that there will be very short term upside gains, if any, in oil is the US dollar where I expect, aside from direct Fed molestation, buyers to give sellers a beating at 95.00.

DXY Weekly Chart. Caveat: dollar upside could depend on Gold, rather than an inverse correlation with stocks. 

I'm not saying 95.00 is going to be Gettysburg for Dollar sellers, but markets likely remember that DXY closed above par in November 2015. That's going to mean something, for greater US dollar upside, and I think 95.00 is the battleground where sellers could lose. Yes, I know I am somewhat contradicting myself considering all the noisy price action to the left, but...

US Ten Year Yield Monthly Chart

unless treasury yields are going to rally here, which is unlikely without Fed intervention (what are they going to do, raise rates?), I don't see further USD downside or oil/stock market upside beyond short buy side trading opportunities into resistance levels to place sell orders in conjunction with the downtrend.

Question or comment below. 

Happy trading.   

Fed Testimony Aids Selloff

For those who think the Federal Reserve has any idea what it's doing, or think the central bank of disaster has credibility among the economy and markets, yesterday's price action was a meal of your own words.

In a down market, like this one, up moves are opportunities to sell and yesterday's Fed blabber-mouthing by Janet Yellen slammed price into a level of resistance where sell orders filled faster than Hillary Clinton can delete classified emails.

S&P Futures Chart 60M

Weekly Wrap up 1 - 5 Feb 2016

My technical thesis last week would be green was overcast by deleveraging in every sector associated with the 2013 breakout. Although markets are in an overall downtrend, there was, at the beginning of the week, enough technical evidence to support an up move to SPX 2000 and DJI 17,000.

Remember we are not trading the real economy. If we were there wouldn't be anything to trade. In these markets we are trading the fictitious economy created by Fed inflationary monetary policy and "strong employment numbers" like Obama touted on Friday. Technical analysis is not about trading what you hear or what you know, only what you see. From last Sunday's charts price looked like it had more up than downside potential going into the week.

However, despite some small upside trades on SPX and DJI correlated products my short term "rights" were overshadowed by longer term "wrongs".

From the SPX daily chart (above) we can see how price started Monday, 1 Feb, down then rallied but failed to close above the prior Friday's high suggesting trouble for my "target 2000" premise. The upside, to this otherwise down week, is the floor is still holding at 1875.

Looking at the DOW we can see how it, without the weight of under-performing financials, fared better than the S&P 500 yet, like the SPX, did not manage to place new highs above the previous week's close.

If the NASDAQ is the harbinger of death for bull markets (above) then price aggressively converging on the 4300 level might mean something. This index and the IWM are the worst looking of the majors, Gold and the 30 year bond (price) being mirror opposites.  

The problem for last week's "up" thesis was the real economy, the one were not supposed to hear about, reared it monstrous head exposing asset classes for the paper tiger house of cards they really are.  

Considering the weakness, overall downtrend, and likely impending destruction of price appreciation, I will start next week open to upside trades while  expecting floors on the aforementioned indexes to fail. 

Question and comment below.

Happy trading.

Iowa and a rally

Trump will make a solid premeditated comeback in New Hampshire as Cruz begins to face legal questions over his ineligibility to become a US president, under Article 2 of the US Constitution, and SEC campaign finance violations pertaining to his Fed window rate, US Senate loan. Hey, we don't just predict markets around here.

Since I have an actual job that requires me to go out and move stuff around, instead of sitting in front of charts day in and out, I have no idea why markets sold off toady, nor do I care since price has moved into my 'Sunday fallback levels' of  SPX 1894 and DJI 16040.

Never ask why or when markets move. Only be happy they do move and be ready with appropriate buy or sell orders.

Today's sell off should be the end of down pressure for a while, meaning institutions have shaken all the ignorant, squeamish, knee-knocking (you know who you are) players form their fragile branches of market indecision allowing the real rally to begin. What's my proof? Have a look at the DOW and S&P.

What are my supporting indicators, you ask? How about the falling USD and US 10 year? Oh, Oil broke $30 today? Well, that could be an issue, which is why we have to, as professional market speculators, be willing to abandon a non-working thesis and adopt its polar opposite. Markets are not politics, values, history, religion, or culture. If you're wrong, admit it, get the fork out of a bleeding position, and look for the next opportunity.

As for now, however, negative and positive correlating indicators have not turned over. A weak yield and a weak USD directly correlates to rising equities prices. Unless, that is, all of the world's risk assets are tied to falling oil prices. Then we'll have a much lower than expected market for a much longer than expected amount of time.

Happy trading.

Monday 1 Feb 2016: The continuing decline of oil

 

Yesterday's forecast of an up trending US market played out from the NY open. Hopefully the information was useful in judging long entries on your SPX and DJI correlated products.

Today oil seemed to, again, be the headline suspect preventing markets from resuming a Fed-fueled destiny with never ending record highs. But what exactly is going on with oil? Will it go lower?

A lot of experts say yes but those people are just chiming in after hearing someone they assume knows what they are talking about repeat it from someone they assume smarter than themselves. After all, how hard is it to say a falling markets will go down and rising markets will go up? You only have to be right once.

Instead of trying to figure out the future price of oil with global supply vs demand or OPEC production quotas and the Saudi welfare state, let's look at the technical argument for lower oil. 

We can see from the above monthly chart how oil price, after returning to the origin of its May 2004 breakout (green arrow) in December 2008, failed to make a new high, topping out at $114 a barrel in April 2011, only to start selling off in July 2014 after a three year consolidation period.

Unable to place above $140 after a retracement to origin of its May 2004 breakout, the technicals were determinate that oil's record run had come to an end. This is what the death of a globally significant, highly manipulated, and intentionally inflated commodity looks like.

So if your uncle is telling you that "now" is the time to buy his broker's favorite oil ETF I can guarantee that (barring a global cataclysmic event) you will be catching a falling knife and had better wait until the $22 - $14 level before loading up on any longs correlated to crude oil markets.

Happy trading.

Markets Week of 1 Feb - 5 Feb

Welcome to the inaugural post for The Market Metric!

Let's look at the US majors and their correlating indicators.

This should be an easy up week for stocks as the SPX clears 1940 inbound for 2000. Look to enter long on your S&P cousins at SPX 1914. ISM Manufacturing comes out at 10:00 ET Monday, so  expect to enter long around 1894 the number is significantly below 48.6.

Receptively position your DOW correlated buy entries around 16300, or 16040 on a broader pullback or missed ISM estimate, with weekly targets at 17000 and 17360.

Adding support to this week's up market thesis is the falling 10 Year yield.  Yes, price did reach a vital, high time frame support level at 1.95 but I believe that level will fail considering the strength in which price arrived and closed the previous week. As the Fed has tried to prove, falling yields are good for risk asset price appreciation.

We have to look at a monthly chart to see the last time the DXY was at its current highs (chart pictured below is a daily chart). Although I expect the US dollar to trend above par in coming weeks, accompanying a broader market sell off, look for a reversion to 98.90 level, or not. We could be witnessing a sea change to positive correlation between the USD and US equity prices fueled by the Fed tightening and BOJ/EU banks pushing their rates into negative territory. 

 Something to keep and eye on. 

 Happy trading.