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.