Will It Hold Wednesday.

The day was according to the plan. All the asset classes are moving in tandem and appear to be in line with the expectation. A quick review of various assets classes are as follows:

Equities: We are coming closer to the cycle top and while my upside target in SPX is 1425, we came pretty close intra-day at 1420. Will that be considered as target met? I have started scaling in short positions with inverse ETFs for indices and will add some more tomorrow. Again, the basic premise here is “Patience” and “Agility”. The correction may or may not start tomorrow. But this was a counter trend bounce which we called well in advance and had a bounce target. Now that we are close to that target, both in terms of price and time, it seems that short trades are high probability trade.  The coming down move most likely will make a lower low than what we had on November 16, enough to create doubt and fear in the minds of the retail investors. That is when the Boyz will buy cheap and pump the prices up again.  As you have seen in yesterdays Dilbert cartoon, someone will create Media frenzy, Banksters will pump or dump the prices and Sheeples will be sheared off.

I am sure that when I will call you guys to go long next month, many of you will hesitate and wait for everything to be OK. And when everything will seem OK, it will be time to sell again. To win this con game, we have to go where the puck is going to be, not where the puck is.

Precious Metals: Silver had a moment of madness and spiked higher but gold was not able to cover the loss of yesterday. I did take a small short position in silver with ZSL with a very tight stop. If Silver closes above $ 35 next week, I will close this trade but for now I expect silver to correct along with equities. How much it will go down I am not sure. The 1^st target is a close below $33 and then I will add some more short positions. So right now, there is a range for this trade and I would be monitoring this range for further action. I am not touching gold for now and will wait for all risk assets to bottom before going long again.

Crude:  Crude made a possible double top around $ 88.50 and did not held on to the gain. Like equities, here also the short term cycle has topped or about to top and I do expect further correction in Crude prices. I am short crude with SCO and will add some more tomorrow. Once it closes below $ 86, we can be very sure of the coming correction and the minimum downside price target would be around $75-$77. Let’s wait and see how it plays out. I think this one is a high probability trade.

Coffee:  While coffee seems to have made a bottom, the hourly chart is overbought and we might see some pull back shortly. It is where that pullback ends will give credence to the bottoming of coffee. There is no hurry. From a high of $308.9, coffee had corrected to $ 144 which is more than 50%. So we have lots to cover on the upside and we can afford to wait for a while for confirmation. I just want to draw your attention to this potential winner.

Nat. Gas: Most likely it gave a short term sell signal but I do not think it is going to be anything serious. The biggest oil company in the world, Exxon Mobil is getting in Nat. Gas in a big way and when such a giant starts taking a position, we know the future. I would be looking to add Nat. Gas as a long term play in future.

Bonds: For many months now Bonds are moving in a range. TLT made a high in last July and since then it is just chopping around. As there is no clear direction, I have not touched it. But the long term trend is clear. If you are long bond, it would be better to book profit. The interest rates will start going up starting sometime in the next 3-4 months.  TBT will be the trade of the life time then. But we will have to wait for that trade as the time is not yet ripe for taking any position in Bond. The inverse relationship between Bond and Equity is about to get discarded.

That’s all for tonight. Thank you for sharing my thoughts. Hope you are able to pass on the blog to your friends and join me in twitter (@BBFinanceblog). As I said yesterday, come January, we will have a paid subscription service to selected few with specific trade ideas. I will be emailing at least once a week high probability trades with entry, stop loss and exit points. If you have been reading this blog for a while, you know that I will try to minimize risk and look for high probability trades.  Of course it will be a paid service and I am looking only a selected few. So if you are a serious investor, with investment of minimum $100 K or more, looking to earn decent return on your portfolio consistently without speculation or undue risk, do send an email to: bbfinanceblog@gmail.com to be included in the mailing list.

The "How On Earth" Factor.

How many of you were tempted to short or did actually short the market in the morning. It was as if the bottom was about to fall off. Exactly the stuff I wrote yesterday. Did you feel that you are going to miss out? If you did, you are not alone because I myself felt like that and that despite my own writing that such a thing is going to happen. So I just walked away from the trading desk for an hour.

Now all the talking heads, media of all kinds and of course ZH is attributing the rally to Mr. Boehner. But Mr. Speaker sure did not read my blog post of yesterday. Nor did I know that he would speak today or whatever he would say.  Someone has asked over email which chart / indicator predicted the sell off and subsequent rally. The answer is: there is no Technical Indicator which will tell you that there will be sell off tomorrow morning and bounce in the afternoon. It is much more complex than that and much more intuitive. At least it has helped some of you folks to stay out of harm’s way and I am glad for that.

So where do we go from here? My reading is that the bounce will continue tomorrow and tomorrow most likely would be a good time to start scaling in some short positions. My personal favourite is Crude. I am still debating about Silver. I am not sure if it will correct and how much. But Russell 2000 looks a good candidate and so does Facebook.  However please do your own due diligence and have proper stop loss in place for any trade you take. And please do remember, the market is not going to tank whatever ZH may say.

People who know the inner working of the Washington DC have started buying already. But they will want retail to sell out and drive the price down some more, so that they can buy cheap. I would suggest that you start preparing your buy list along with your Christmas present list. Consider this advice my Christmas gift! I am not saying that we buy now. I am saying that we should be ready so that when there is some fear in the market and things look bad, be ready to pick up the bargains.

Few days back I brought your attention to Coffee and identified JO as the vehicle of choice. Today JO gave the largest bullish wick in months from its long term support line. I will be scaling in JO on the long side of the trade with a tight stop loss.

My sabbatical will end in December and from next year I will be back to what I do for living. Crunch number. The blog posts will be irregular but we still have a month or so. Those of you who think that I can add value to your investment and trading, please email to be included in a select list. I will be sending personalized email to this group highlighting trading / investment opportunities every week. If you have been reading this blog for a while, you know that I will try to minimize risk and look for high probability trades.  Of course it will be a paid service and I am looking only a selected few. It will cost less than a daily cup of Starbucks' Cafe’ Mocha.

But those are plans for next year. Let us make some money with free advice this year and we will take from there. Thanks for sharing my thoughts and hopefully you will also share it with your friends. Stay frosty folks. 

Today's Watchword: "Patience".

For those of you itching to short, some more patience is needed. Tomorrow the market will tease you with some more selling and you will be tempted to short. You will think, gosh, I am going to miss the opportunity. That “Fear of missing out” will come in play. Only thing I can say is: have patience. The cycles for risk assets are up for few more days. It does not mean that market will go up and up. It just means that although we may see some more selling tomorrow, we better wait for the cycle to top before we short, least we fall for a bear trap.

While I expect one more round of selling starting December, I am not sure of the magnitude of selling. May be it will continue for the whole month of December but if some sort of kicking the can down the road game is played by the politicians, the selling may not be very deep either. So it is a fluid situation after all and while the only trade is a short trade for now, let us be ready to get out of the water very quickly. For, only the direction is certain and not the level of up or down move.

As I keep repeating, the world and USA is not going to end tomorrow. ( It will end little later) While we have some nice opportunities on the short side we are also going to have some great opportunities on the long side as well and those opportunities are coming up much quicker than you can imagine. And if you have not noticed already, for the retail investors, it is easier to make money on the long side than on the short side. 

PM sector, particularly gold is not showing the strength and is nowhere near $1780, its earlier high for this year. That makes me think that may be one more correction is due for gold along with other risk assets. But I do not want to short gold and as of now waiting in the sideline to go long.

The situation in Europe is not all that bad as the MSM and ZH would have us believe. In long run, may be in next 18 months or so, Euro will split up and there will be two Euro. A Northern Euro consisting of the strong economies and a Southern Euro of the PIIGS led by France. And it may sound a bit far-fetched  (Like the Apple $ 500 call) that Northern Euro will become the reserve currency of the world. But that is still some months away. Till that time, USA will be able to print as much as it want and still keep the bond yield at ridiculously low level. They are talking of reducing $ 1 trillion over 10 years, when the deficit is over $ 16 trillion not considering un- funded liabilities. It’s a joke and sooner we realize the joke, better for us.

The other side of the joke is that everyone is MSM and all talking heads are going ga ga over the bounce in housing and now everyone wants to join the gravy train. Particularly all Pundits are talking about home-builders like LEN and TOLL. I think this trade is now overcrowded and better avoided. Sorry guys, you are late in the party and it is better to give it a miss. In any case I do not believe that Housing has bottomed and we will revisit this subject after six months.

Some of the readers may be getting confused as to what are my views of the economy. Is it improving or going to hell in hand basket. I tell you what. From your investment and trading point of view, it does not matter what you believe. All it matters as how your portfolio is performing. While I do not believe that the end is upon us tomorrow, I also do not believe that we are any better off than we were four years ago.  But in the mean time the Fed has flooded the market with crisp notes and we would be fool not to take the advantage. The whole system is rigged and we are mere pawns. But let us not trade with our belief.

That’s all for this evening. Thanks for sharing my thoughts. Please remember the Amazon link.

Tale of two Indices.

It’s a tale of SPX and NDX. When the correction started 70 moons back from a high of 1470, SPX came down to 1344. 126 points or 8.6% . Not really earth shaking but OK.  NDX came down from 2880 to 2494 i.e. 386 points or 13.4%. Tech. stocks were lower across the board lead by Apple which dropped almost 25% from peak to trough.   

Now while the bounce is in progress, SPX has retraced about 50% while NDX has retraced little above 38.2%. I expect SPX to retrace up to 61.8% which is around 1420 +/- few points. Will NDX also retrace 61.8%? 61.8 retracement levels in NDX is around 2730. If so then NDX still has another 80 points to run.  It is not guaranteed but with cycles up for few more days anything can happen. The point here, if you are thinking of shorting the indices, better wait for few more days and if you are thinking of taking a day trade, NDX is a better option than SPX.

What is worth noting, since September 14, SPX has lost about 60 points and unless we are very nimble trader, watching the market move every moment of the day, did we lose much by staying in the sideline? Well, we did not exactly stay in the sideline; we dabbled in Nat. Gas for a nifty profit and now waiting for other opportunities. We may get another chance of shorting and this time many parameters are lining up. While shorting, we have to be very quick to grab and run because this is not going to be the end of the world that many are waiting for.

The USD index continues to behave as expected but apart from NDX other risk assets are not showing much vigor. At the point of writing Euro has broken up and has touched 1.30 and yet Crude is languishing and hardly any movement from Gold and Silver.  May be they will also break to the upside but so far that has not happened.

Last week I closed most of my Nat. Gas position and thank my lucky starts that I did. It is always better to be lucky than smart. Nat. Gas corrected almost 4.5% today. So far it seems that $3.70 is the support and that held. The longer term price target is much higher but nothing goes up or down in a straight line.

 Coming back to the Euro, the irrational exuberance is being attributed to the  successful completion of the Greek Aid. Gosh, how long to listen to the same story and how come the market reacts the same way every time. I cannot attribute any logic or reason except that short term cycle of risk assets are up for the week.  So maybe we should just ignore all noise and stop looking for reasons and logic and just accept it as they are.

Among many stories and news that I read during the day the one that touched me is the following : Supermarket Owner Gives Away Stores to his 400 Employees: http://news.yahoo.com/blogs/trending-now/supermarket-owner-gives-away-stores-400-employees-191200868.html . God bless him and his family.

Before hitting the “Publish” button, here is a contrarian short idea.

(H/T Schaffer’s Market research)

If shorting crude is going to be a good trade, may be this one goes hand in hand with that trade. Please send your feedback and ideas as to how best to short Oil Services.

Thanks for your support and help and for reading the blog. 

A Must Read Interview

If you want to make a sense of all the economic data and find out where the country is going without all the BullS**t coming out of doom and gloom camp please read the following interview:

http://www.businessinsider.com/bill-mcbride-of-calculated-risk-2012-11

Have a great week end folks.

Market Gives Thanksgiving Gifts.

Hope you all had a great ThanksGiving. Today the half day session presented quite a nice Turkey, deep fried Texas style. Only folks complaining were Zerohedge who found many reasons why this is a fake rally. Most likely they do not read this blog otherwise they would have known that we have called for this bounce weeks back. We can also tell them that this bounce will continue for better part of next week. It does not mean we are long. But we can save them lots of heartache and agro.

Those of you who lost tons of money since 2009 getting caught up in bear talk and that imminent collapse here is one blog you must read everyday just to re-wire the brain.  http://www.calculatedriskblog.com/

Bill was 1^st to start financial blogging before doom and gloom blog became fashionable and he identified the collapse of the financial system in 2007. He is a genuine person who is not into ranting and always gives facts to justify his position. His website is hosted here in America and he does not get money from anybody to create negative propaganda. This one is a must read for those of you who have been brain-wasted by Voldemort.

Anyway, the half day session saw all risk assets rip higher. Gold and silver had a nice jump and most likely the trade suggested by Stock Trader’s Almanac is going to be winner 13 year in a row. But if you also remember, the exit date of that trade is around December 2-4. So if you are long PM as a trade, remember to take profit. Crude however is moving in the range. But the most important thing which I thought worth mentioning today is the dollar index.

US$ Index dived almost 1% which is a big move in one day and no wonder PMs are jumping higher. But crude has not been able to close higher when USD is at a low, it does not bode well for crude in future. This chart of crude is from Lance Roberts.

I had written before that Crude may bounce upto $ 91-92 and this chart supports my calculation. Should Crude reach that level and Dollar Index reach 79.50 in the next 3 or 4 trading sessions, it will set up a nice short entry.

Nat.Gas reached close to my up-side projection and I had closed half my position. Most likely I will look for getting out of the rest by next week. I expect Nat.Gas to go up $ 6 but in short term, it has gone up almost 50% in 6 months and is time for some pull back. It may not happen but why take the risk.

Equities most likely will see some pull back on Monday before one final push up. The sell set up will kick in around 1425-30 or November 29^th, whichever comes 1^st. And this time I plan to go short with some leveraged ETFs.

In my last post I wrote about coffee. I think it is bottoming and look for the confirmation as highlighted by our dear reader in the last post. This has to be a long term trade and have your stop loss according to your risk tolerance level.

So you see, we have lots of opportunities coming up next week.  Santa is giving you advance gifts and I hope you will be nimble enough to grab them. I cannot directly tell you what trade to take. I can only say what I have done. So join me in Tweeter because I will tweet as I take a trade. Also please share the blog with your friends who may benefit from it.

Enjoy your long weekend and have fun. Thanks for your donations and supports. The blog now has a link for a job board and I hope it will be useful to some of you. Looking for your feedbacks and questions.

Happy Thanksgiving.

So here we go again. SPX up 4 days in a row and yet except one day, it has not done much. In 4 days it has covered less than 50 points and is struggling with the Fib.38.2 retracement level. There is only half a trading day this week and then the cycle is up for another 4 /5 days. As of now, I do not think SPX will cross 1410 with any conviction and even if it does, most likely it is going to falter at 1420.

I borrowed the following picture from Peter  Brandt.

However I disagree little bit with the level of the bounce and I think it will bounce another 15 points higher from here although I bailed out.

I closed my TQQQ call options today and half of the long position in Nat.Gas. Although there is no immediate danger for Nat.Gas and prices will most likely go up some more, I decided to take some chips off the table. We must leave something for the next guy.

The Middle East cease fire was inked today after few last minute blasts but Crude was up for the day, although it was at the same level as day before, just below $ 88. If you listen to the logical explanations of the Crazies, you would expect Crude to sell off after the fighting stop. But the opposite happened. Yesterday I wrote that it is still little early to short Crude. We need to wait for few more days till the bounce fades in all risk assets. This is another trade which I think would be a safer bet.

Another short trade I am looking at is Silver. If Silver fails to clear $34 by the next week end and closes below $32, I am going to take a stab at shorting silver. But for that few conditions have to be met. I will tweet if I enter the trade.

Also, take a look at coffee, which I think is making a long term bottom like Nat.Gas. Out of the two vehicles for coffee, JO and CAFÉ, I prefer JO. It is less volatile and more stable.  30%-40% return is quite possible in a year but you have to give it time and be patient.

You see, there are lots of opportunities and fish out there without worrying too much about the equities. We will either go long or short when we have all the parameters lined up. But in between there are other opportunities which we can be watchful for.

That’s all for this evening. If you are travelling, travel safe. Don’t let the trolls at Airport bother you too much.  And for your Black Friday shopping, do remember the Amazon link in the blog. Once again, thanks for the donations. 

All Quiet On The Western Front.

Nothing much to say except that every asset class is following the script. If you are a regular reader of this blog, nothing in the market’s action today would surprise you. Equities held ground, crude sold off, PMs are neither here nor there.  It has all been told before.

They say that because Ben opened his big mouth, equities dropped. Poor Ben! Before QE Infinity, folks would eat his every word and now they don’t want him to open his mouth.

We are close to the 1^st target of bounce which is Fib.38.2% retracement.  Anyway, it does not matter how high the bounce goes, so long it holds till the end of the month. My initial target is around SPX 1400-1425 but I would not be surprised if it goes higher. I am using out of money calls of December to play the bounce and have advised everyone who care to listen not to go long, rather reduce the equity exposure.

Regarding Crude, the bounce failed. Despite the valiant efforts of chief ranter to scare folks with coming zooming of oil price, it closed 2% lower. And yet it is too early to short it. I think crude may spend few more days in this range, backing and filling before we can short it again.

Gold and silver should be going up because this the good seasonal period for the bounce but so far they have not shown much strength. I find that little worrisome, so I am staying away from it for now.

And Nat. Gas continued it’s up move which I had written before.  Not much to comment there either.

So you see, nothing much has changed and I am not finding much to blah blah.

Hope you are able to make some profitable trades because the calls could not have been much clearer. If you have any question, please feel free to email.

Thanks for stopping by. Hope to see you tomorrow. Have a great evening folks.

Bear Market Rally-Part 2

Well, that was quite a bounce. There are theories galore for the rip but the fact remains that it was due and it came on schedule. How are you playing the bounce? Yes, it is just a bounce not a trend change, which is firmly down. We have talked about this bounce and we knew it is coming. What we don’t know is how far this bounce will go. This week is a shortened week, nothing much is going to happen after Wednesday afternoon. So whatever more upside is to come, will be next week and this time I would take up short positions. But that is still two weeks away and lets 1^st see how these two weeks play out.  I would love to see the equities making a high around November 28-29 and short the hell out of it. Rating Agencies put a spanner in the enthusiasm and downgraded France. Euro had a knee jerk reaction but is slowly recovering. SPX futures are down about 1 handles and Rant in Chief is predicting a collapse tomorrow. Let’s do a quick recap:

Equities:

As expected we have the low and a bounce.  Apple had 7% + bounce. Question everyone asking is: how far will it go? My guess is not very far. I would be happy to get up-to 1425 in SPX but I have a feeling it will go further. The other option is to measure the time. Cycles tell me that the up move has a life of about 2 weeks. So instead of front running, let us just wait and see how far it goes till then.

As I have written before, I am playing this bounce with out of money calls on TQQQ or TNA.

Here is the paradox. Now we have a confirmed sell signal. But the late bears have been taken to cleaners. Let me share this chart from Lance Roberts:

So we have about 2 weeks to enjoy the ride up and make the most of it. But again and again I would caution readers that this is not the time to go long equities. Rather, use the bounce to reduce the exposure. We will get a better entry opportunity soon.

Crude:

As the saying goes, rising tide lifts all boats, crude also rose along with other risk assets. The story is same here as well. I have already written that crude will rise along with Euro. Crude is also oversold short term and a price target of around $91-$92 can be expected. Also it would be a wonderful opportunity to short in case you have missed it last time. But there is no hurry. In fact higher it goes better the shorting opportunity.  There is a confirmed sell signal for Crude as well.

Precious Metals:

May be I closed my long gold little early but I am not feeling confident about the PMs here. Even today, with everything ripping up, Gold did not convincingly close above $ 1730 or silver did not cross $33 very robustly.  At the time of writing, both are below that respective line and the prices did not held above. May be PMs will get a boost along with other asset classes but I would rather wait for a while longer.

Nat.Gas:

Nat.Gas did sell off today. It seems that traders took some money out of it to play the equities and crude. If that is correct, we will see Nat.Gas struggling a bit for the next two weeks but I think it is making a base at $3.70 and will make a run higher. Normally Nat.gas spends a lot of time in one range and all of sudden jumps to the next level. Just a bit more patience needed.

Other Stuff:

While the late bears have been slaughtered and will have little love for the next two weeks, the rally to the yearend cry has started popping up. This is nonsense. The selling is not over. Let me put it in a better way. The real selling has not yet started. Too many folks were and still are complacent about the correction.  Did you read about Romney backer, Steve Wynn, declared a special dividend so that he can save on tax which will go up next year? Or for that matter Wall Mart preponing its dividend dates? Funds will sell in December to book profit/loss whatever and get out of long positions. We should also take a cue.

Thanks for reading World of Finance. Hope you are able to stay on the right side of the market and make some money.  Thanks for your donations and supports and I take this opportunity to remind you about the Amazon link for your Black Friday Shopping. 

Bear Market Rally.

The bear is tired and is going for a short nap.

A quick recap with various asset class follows:

Equities:

In my last post I said that I am looking for a quick bottom on Friday and a bounce from there. The downside target for this stage has been achieved and I would be very surprised to see any lower low from here. In fact we can expect a fast and furious rally but don’t let that fool you. It is still a bear market rally and don’t let the guard down. I have said before that so far the bears have disappointed us. It has been less than 10% correction spanning over 60 days. All it has done is to create a fear psychosis and the pedlars of gloom and doom have had a good time.

The short term cycles now looking for a bounce and I have some support from the Analog of Eric Stewart. I have said before that I do not trade based on Analogs. There are software available which will show you many matching patterns. But they are fun to watch while they last and sometimes act as an echo chamber, reconfirming what we already believe. So right now I believe that we will have a bounce and therefore I think that this Analog is super:

But I have other reasons to believe that there will be a bounce and not just this Analog. It will be good if it works out this way.

I am not going long because I think the bounce will be temporary. Rather, I would use this opportunity to short the market after the bounce is over. For now, if I would like to play the bounce, I would probably buy some cheap, out of money calls on TQQQ or TNA for December and risk very little capital, if at all.

Precious Metals:

I was looking for a two week bounce in PM sector but so far the price actions do not show any strength. Longer term I do expect Gold to reach $2500 and silver to cross $50. The COT action shows that deep accumulation is going on but the BOYZ want to shake out the weak retail hands. So we might see a quick sell off which may not be very deep but emotionally disturbing. For e.g. if we see gold below $1700, there will be noise in the MSM that gold’s golden days are over. Silver may even test $26-$27, if it closes below $32. A quick trade can be ; buy ZSL if silver closes below $32. It may generate a 40% return in 45 days. If we have a core position, we should not bother much but use the weakness to accumulate more. This is just a trade idea.

Crude:

The bounce in crude is just that. A bounce. It is following the Euro and nobody believes that the fight between Israel and the terrorist organization Hamas will lead to supply disruption in crude. Crude might stay elevated along with the equities and like equities; it will be a very good shorting opportunity. I may short crude in the coming days and I am very sure that this one is going to be a  low risk winning trade.

Other Stuff:

In other stuff, the dogs of Russia wrote that IDF (Israel Defence Force)Blog has been hacked and is out of commission. This is a big lie. IDF checks its visitors and if they think that the visitor is not harmful, they will allow access. Obviously the Russian Agent was denied access and they twisted it in a different way.  I am trying to stay away from political discussion and stay focused on the market. But this is one exception I am going to make, that is, express my support and solidarity with Israel.

That’s all for this nice weekend. If you have any question, you are free to shoot me an email any-time. Thank you for all your generous donations and once again, I take this opportunity to remind you about the Amazon link for the coming back Friday. Have a great weekend friends.

Falling Apple.

Someone has literally yelled fire under Apple stock and the stampede to the exit is resulting in casualties.  What happened to all those projection of $ 1000? Why those analysts are not being shamed publicly? But that is Wall St. for you and that’s what all the talking heads do in the various 24/7 TV channels. Sell snake oils.

If you are holding Apple and find yourself at a loss position, there are two alternatives. Depending on what is your cost, cut the loss. But if you are still holding it now, you may want to hold it till next April-May. Apple will definitely retest $ 700 before we can call it’s all over. 

As of now, I am very disappointed with the bears. Over 60 days ago we had the high in SPX and so far we are down only 8%. It is not even an official correction and McClellan Oscillator is down oversold. It is time for a bounce because there is not much scope for more downside.

On a daily chart, SPX is down almost 3% standard deviation. It will be nice if we get a panic low of another 10 points and I am hoping we will get that low tomorrow. But even otherwise, we had a intraday low of 1345 in /ES (emini or spx futures) and my downside target is around 1340 in futures. So we are very close to a bottom and may be the bottom has been reached or we are almost there. In any case the divergence in VIX is quite telling and I do not how to explain it except that may be smart money knows that a collapse is not yet imminent.

(H/T John Kicklighter)

Both Gold and Nat.Gas had a bit of sell off today. As of now I am looking for $ 4.00-$ 4.10 as the upside in Nat.Gas which is about 8%-10% from here.  We already had 10% upside from $ 3.40. That is more than the downside correction we had so far in equity indices. Gold is suppose to have a bounce in the next two weeks and the moot point is whether it will close above $1800.

Crude again sold off today. What happened to all those shrill cry of all out war in Middle East and crude going through the roof? I think cycles know best. While a bounce in crude is due now along with Euro, the down turn in crude is not done yet.

Except AUD, all other pairs are at odds with the equities. Euro is making good progress against US $. Whatever happened to the collapse of the Eurozone? But we do not want to go long in Euro because this bounce is just that, a bounce.

Overall, I am looking for a quick bottom by tomorrow and a short term bounce. The magnitude of the bounce will tell us if the correction is over but I think we will see more selling after the bounce. Normally the lows will be retested again before we can have all sorts of divergences. And the fiscal cliff is very much a possibility and not sorted out. Many big funds have already sold some of their portfolio and they will sell again in December. So we are not done yet. Like I said yesterday, it will be prudent to reduce the exposure in equities but I don’t buy the collapse scenario yet.

Thanks for sharing my thoughts and for your donations. Really appreciate your help and support. Please keep an eye on the Amazon link should you need anything from Amazon.

A Quick Trade In Gold?

Today Israel killed one of its dreaded terrorist. Good for Israel. But the agent of Russia immediately jumped out to support the terrorists and started barking. It proclaimed that now there will be an all out war in Middle East and Crude will go through the roof. These enemies of Israel even started ridiculing Bank of Israel with their Apple position. How do they know that Bank of Israel still hold Apple and have not already sold it at a profit. They don’t. It’s all baloney and treason.

On a short term basis Crude is due for a bounce and unless it takes out $92 in the next two weeks, we are most likely to see a lower low. US Dollar did not do much and 30 Year Bonds sold off. If the world thinks that there is going to be a war, US$ will jump through the roof.  US$ has retraced Fib. 0.618 of its last down move and will most likely take a breather here. And all commodities will likely benefit from that. So we will see Crude getting a bounce and so will the precious metals. At some point in future US$ and Precious metal will move together and then we will know that bad time is really upon us.

Talking of Apple, here is a chart of Apple which I have borrowed:

(H/T Schaeffer's)

It shows lower highs and higher lows, which means volatility compression. Very soon we will see the stock breaking this triangle and I expect the initial move will be up.

We are also coming close to a short term bottom in equities. As we broke down /ES 1370 the next downside target is /ES 1330-40. If we have one or two more days of selling, we will see panic bottom. As I wrote yesterday, the actions in the equities and in forex are not matching up. While Euro/Yen made good progress, equities did not catch up. One of these two is lying. We will know for sure in few days time.

Similar position is with Euro/USD. However AUD sold off and is now consistent with the down cycle.

Moreover, the action in VIX and 30 year bond do not signify any imminent collapse. There is a positive divergence in VIX. While SPX made lower low, VIX did not confirm.

From a high of 1470, SPX today stands at 1355 or 115 points drop.  From the top that is less than 8% correction in 60 days. And if you listen to the MSM and rant blog, you will think that the world is about to end. Folks, as of now, it is just a correction. While it would be prudent not to be long and reduce exposure to equities, I do not think any long term investor need to be short yet. At least I am not and I am looking for opportunities in other places.

Apart from Nat.Gas, I think there is a short term, less risky opportunity in precious metals.

The following is from Stock Trader’s Almanac:

Gold prices tend to move up prior to the holidays, and the trend has worked especially well over the last 12 years. Seasonally speaking, it is best for traders to go long on or about November 19 and hold until about December 4. Over the last 37 years, this trade has worked 21 times for a success rate of 56.8% .The cumulative profit tallies up to $31,490. What is interesting is that this trade has had a 12-year win streak, starting from 2000. The longer-term record of this trade is not as eye-popping, but with persistent inflation concerns (the Fed has embarked on a third round of asset purchases that has no predefined limit), renewed fears of Europe’s debt crisis, and persistent deficit spending, we would look for the current winning streak to continue. 

They wrote the above yesterday but I am long gold from last week. Because cycles are calling for a short term bounce in Gold.  Let’s take a look at the seasonal chart of Gold.

The chart does show a bounce from Mid-November till end of November / early December.

 Nat.Gas took a breather today which is only to be expected. In fact it should stop here for few days and digest the gain before moving up again. Whether you approach it as a trade or investment is up-to you. As a trade it will go up and down but as an investment, I do expect Nat.Gas to cross $ 6. It may take a while, but it will be there.

That’s everything for this Wednesday. Hope you are not in panic mode nor are you getting greedy to short the market. There are other ways to beat the casino and most important thing is to avoid/ reduce risks at all costs.  Go for something which will definitely go up in few months time.

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Plenty Of Fish.

No, I don’t mean the dating site. I am talking about various asset classes.

Yesterday’s big story was 10% + drop in VIX. What is the story for today?

If you have not guessed it already, it is Nat.Gas. For the past few days I have written in the blog that I am scaling in Nat.Gas. How many of you did take the trade? Because if you did, you would be very happy person today.

After a long time, I got some free time to Tweet in the morning when I wrote that I am expecting a bounce. We got some bounce which did not last but the most important thing is that /ES 1370 held another day. In fact after the cash market closed, SPX futures are up 4 handles and Nasdaq futures are up 15 handles. Go figure how it will be tomorrow. Let us see how it goes but I am neither short nor long equities at this point of time. The market played with bulls and bears alike. In the morning the bears covered and in the evening the bulls covered. At this rate who will be left playing the day trading game? Only your broker will laugh to the bank. Again and again I want to emphasize the point that correction does not mean collapse. We do not have to be short in every correction nor have we to chase every up tick. But we must learn to disregard the noise coming out of the Russian propaganda machine better known as “Mad as a rabid dog” blog.

I want to show you a chart from Chris Kimble.

As you can see, there are about 40 asset classes in that chart. Equity indices are somewhere in the middle and in the last 6 months they have not given much return. On the other hand risks associated with equities have never been higher. Why not look for other fish to fry.  As of now I am waiting for an upward break of Gold which is short term in nature.

The king of carry trade Euro/yen is showing a kind of double bottom.

I think a bounce up-to 102.25 is very possible in the near term. And if it closes above that level, then we can look for a good bounce in SPX. I am not saying it will happen; I just want to draw your attention to all possibilities. On the other hand if it breaks down below 100, we can safely short the market.  As of now, things do not match and 2+2 = 5. So better be safe than sorry. Even AUD is acting strange. It was up today and there is no reason for AUD to go up while cycles are down.

The following table is from Stock Trader’s Almanac and it shows the DIJA performance during the Thanksgiving Week.

According to them:  The best short-term trade appears to go long into weakness this week or on Monday of Thanksgiving week and selling into any subsequent rally before the Friday of Thanksgiving week. 

I find that it is good to know the seasonal pattern but we cannot absolutely always depend on past trends for a correct call. But yesterday I said that I am not going to short the market before November 23^rd and this call from Stock Trader’s Almanac re-confirms my thought process.

That’s all for today. Hope you all are making money in this casino. With black Friday coming up, please remember to use the Amazon link if you plan to buy anything from Amazon.  Thanks for sharing my thoughts.

VIX Got Crushed.

The big news of the day was the 10%+ drop in VIX when the indices were near flat. With November OpEx nearing and markets already having corrected about 80 points in 40 days, there does not seem to be an imminent danger of collapse. More so because politicians of different hues are talking of finding a common ground for the fiscal cliff. I think it has also to do with the short term oversold position of the indices. The rubber band is too stretched and will snap back somewhat before we can see any more selling. If the VIX action is any indication, most likely we will see the weakness to resume by the 4^th week of November and continue till mid to end December.  How far it will bounce is debatable but anything is possible and the actual QE3 starts from tomorrow.  If you remember I am not short yet.

Come to think of it, so far we have had only 80 points correction in SPX and SPX is actually closer to the top than to the bottom. And already we are oversold and the sentiment is quite negative.  Despite the drop in VIX, the put call ratio is high, which means most likely retail is short.

A perfect recipe for a bounce.

I have written in the past that action in the Forex does not confirm with the market perception. If Euro is about to break down, why it is still holding 1.27 line? The ”mad as a rabid dog” rant  blog tells us the Greek is about to go out of Euro Zone or be thrown out. Money is going to run out on November 14^th for the Greeks. Then why their stock market is trading near the top and not near the bottom?

(Chart Bloomberg)

On the weekly chart of SPX, till we see SPX break down below the rising trend line, it is still a correction, not a collapse.

 As of now that line in the sand stands around 1330-1340 and I do not think SPX will go down below that any-time soon. Even that 1330 may be tested only by the 3^rd week of December, if at all. There is a chance that I may be wrong and everything is going to hell in a hand basket but instead of shorting the market now, I am looking for other opportunities. I am long Nat.Gas and will continue with that long position for a while. I am long gold for a quick trade till November 23^rd. I see crude bouncing but I do not want to touch crude now. I see copper bouncing and JJC close to a short term bounce which will be an opportunity to short copper. So you see, there are plenty of fish to catch and instead of getting hung up on the market correction a la 2008-9 type, look for opportunities elsewhere.

Overall, I continue to look for a bounce between 1400 – 1430 SPX. So not a big bounce. By no means the selling is over and I will short the market by way of out of money puts or calls but I will wait for the November OpEx to pass.

That’s all for the Monday evening. Thanks for sharing my thoughts. Do remember to disable Adblock and watch out for Amazon link.

Oversold Markets and Cliffs.

The following two charts are from Bespoke. The 1^st one shows that on a daily basis S&P 500 is 2.5 standard deviation below its 50 DMA.

The last time it was in such a situation was in summer when it got an oversold bounce and then tanked again.

The 2^nd chart shows that % of stocks above its 50 DMA.

Even that is close to extreme.

Yes trends are down but few things are not lining up yet. For one, gold and silver is showing some strength even when US$ is up. Since 2008-9, when Bernanke started his QE, all risk assets have moved together and gold and US$ have moved in opposite direction. Now we are seeing that both gold and US$ is moving in the same direction. Is this a temporary anamoly  or beginning of something more problematic?

Secondly, crude is up for the last few days even in the face of rising dollar and falling stocks. Are commodities diverging from equities?

Third, Euro did not break down 1.27 and Euro/Yen held the all important 1.00 line. As you can see the correlation of Euro/Yen and SPX, unless that line in sand is broken, I do not see stocks going down any further.

And the cycles for Euro/Yen, although close to a top, have not topped yet .

So will we see an oversold bounce soon and if so how far it will go?

I think it is quite possible that a good bounce is due but I do not think it will close anywhere above 1440-1450 in SPX. If we get there, it will be an excellent opportunity to reduce the long positions and add some short positions.

Pandits are talking about the grand bargain and compromise. But I do not think that will come till the last moment, which is by end of the year. Remember how these wise guys played Russian Roulette with debt ceiling? Why it would be any different this time? So definitely we would look for a good sell off and no bottom can be expected before the middle- end of December. This by the way would be a good buying opportunity. Keep your buying list ready.

In the mean time, I have started scaling in Nat.Gas and will most likely scale in short position in equities after the oversold bounce. The expected top around Mid-November seem to have inverted and will most likely be a bottom (short term) but we are not done with selling yet. If anything, it will be a good opportunity to sell.

Do keep in mind the time scale. This sell off will possibly last till 3^rd week of December and it’s a rainbow trip thereafter for few more months. The real cliff is still few months away.

Thanks for sharing my thoughts and thank you for your donations and supports. Please remember to disable Adblock and if you plan to use Amazon for your Holiday shopping needs, remember the link here. Have a great weekend folks.

Wall St.'s Hissy Fit.

Are We Closer To The Cliff?

Is it a repeat of 1987?

I have problem believing and following Analogs but I seriously do not like the market price action. In any case I am looking for a market correction of 15%-20% and my target date to short was around Mid-November. But what if the Christmas has really come early?  I will see the price action overnight and take a call tomorrow about when to go short. My cycles are up for few more days but the market price action does not support that and when the short term cycle tops in few days, maybe we will see the waterfall we are waiting for.

Today both VIX and Indices were down. May be we will see bit of bounce tomorrow. Today US$ was up marginally while gold silver and crude was up substantially. Nat.Gas is moving in a range and its cycle is close to a bottom. I have started scaling in Nat.Gas and I expect higher prices going forward. I think as of now it is a safer bet.

By the way, does anyone of you remember my call for Apple at $500? At that time it sounded ridiculous. But now it seems Apple may go down below $500. And Galaxy S3 is the most popular Smartphone in the world.  Some are calling for a bounce and maybe we will get a bounce but it is too early for bottom fishing. Like trying to catch a falling knife. I would stay away from Apple till we have a definitive bottom which we do not have today.  I just do not understand who those folks are selling Apple at $ 550 when they did not sell it at $ 700.

Coming back to market, gold and silver are showing some strength and although I do not think we will see the bounce from here, gold and gold miners may be good for a short trade. The strength in gold is another reason I have difficulty in accepting that there is panic in the market.

Apart from Natural Gas, there is another trade of the decade which I want to draw your attention. That is 3D printers and 3D printing technology. In the next 10 years, this technology will change the business world like PC and internet did 10-15 years back. Two stocks, SSYS and DDD are up even in this down market and may be something we should keep an eye on to add to the portfolio by the end of the year.

Today reader PM Hana sent a huge donation and my special thanks to him. My sincere thanks to all of you for donating to the blog. I cannot thank you enough for all your help and support.

Thanks for sharing my thoughts and reading the blog. Trade safe guys.

Movers Did Not Show Up.

The movers did not show up and the Wall St. is screaming bloody murder. They might as well because the screw is about to get tight for the next four years. These folks have invested millions of dollars on Romney win and Obama is not going to forget that in a hurry. The TBTF banks can expect more lawsuits and regulations going forward.  And this is preciously the reason I was not long and was asking readers not to chase the bus. But it seems that today’s 2.5% sell off is not the biggest. In his 1^st term Obama encouraged a 5% sell off on the day after winning. Some interesting fun facts from Schaeffers:

And as you can see from the table, we cannot make any prediction about the rest of the year based on this statistics. Question is, did Christmas come early for the bears?

I am waiting patiently for shorting the market and so far I think it is still bit early for the party. Apart from cycles, let me show you few other things. Let’s start with VIX. Despite SPX making a lower low, VIX is still in the teens and did not make a new high.

The 2^nd contrarian move is coming from the currencies. AUD did not break down and EURO held 1.27 levels well. Even EURO/YEN cross is holding the crucial 1.02 and the cycles for that cross does not top for another two weeks.  A correlation of SPX with EURO/YEN is as follows:

Going short is the most difficult trade in this day and age of unlimited money printing. You never know when a short squeeze will come because so much free money is floating around. Therefore, as much I want to short the market, I would rather wait to make sure that the ducks are in line. For that if we miss few points at the beginning, it is worth the sacrifice. And when I am very much certain that this is just going to be a correction, in the range of 15% -20% and nothing more, not a repeat of 2008-9.  

What is the trade then I would be looking for? I think I would adopt a long short strategy here. Instead of shorting the market in all asset class, I would rather long some sectors and short some. One sector I am planning to go long is Natural Gas. If you remember, in the past we have discussed that Nat.Gas is going to be the trade of the decade. And it has so far refused to go down below $3.40. So why not start building up a position in Natural Gas futures. I do not want to get into the stocks of companies dealing in Natural gas because those shares will be affected with the general market weakness. The best bet is to concentrate on futures. I found a list of ETFs for Nat.Gas and here is the list.

http://ca.finance.yahoo.com/news/comprehensive-guide-natural-gas-etfs-155852002.html

 May be I would buy BOIL and sell LEAPs covered call to cover any downside risk.

And I would start buying some reverse ETFs after the OPEX.

Once again, there is no rush. If this is the big correction we are looking for there will be plenty of points to run for. But we have to make sure it is not a head fake.

That’s all for tonight. My sincere thanks to those of you who have sent donations. Your help and support is more important than ever. I hope we will be able to make money in the coming days but more important than that, we should not lose money. Stay frosty folks.

Who Will Ruin America.

Tomorrow we will know who will ruin, I mean rule America for next four years.  MSM is speculating the reason for the rise in the stock market today. Each has own spin as to who is going to win and the regular folks are caught up in the heat of the debate. Little do they realize that it does not matter who wins, the kleptocracy always wins. All they are going to get is four more years of bullshit. Even when the bull changes, the bullshit remains the same.

I have been writing for quite a while that we are going for a bounce before we can see any meaningful correction. And I am not sure how many ways I can spin the same story every day, because the theme has not changed, despite all the news and noise. Folks forget that it is the price action which creates the news not the other way around. You can give any reason to the rise in stock prices but irrespective of the reasons, it was to rise anyway.

So no new charts today to show you anything important. I am sure you will be watching the talking heads with their fancy presentations to find out about the winner.  But instead of congratulating him, maybe we should pity him because cycles are saying that he has very rough roads ahead. In comparison, the last 4 years would appear to be walking in the garden. Again, it does not mean the world is going to end tomorrow. Not even in the next few months for that matter.

For me, the most important news of the day is not who wins the election. It actually came from down under. A court in Australian has found S&P guilty of misleading investors. This is a watershed moment folks. There were many parties responsible for the 2008-9 financial meltdowns. No doubt banks were at the front and centre of that fraud but I think it could not have happened without the active participation of the rating agencies. These rating agencies gave AAA ratings to toxic papers and should be held accountable as such. Australia has shown the way and I hope courts in UK and Europe follows through. I do not have much hope that justice will be served here in America but at least somewhere in the world these crooks are being served the punishment. Way to go Australia. You are the last hope of the free world.

Coming back to market, if MR wins, the stock rally will be attributed to that win, however absurd that may be. Give it any name you want but such a rally has been on the cards for a long time and I should short such a rally. If you remember my earlier call, get out of the long position on the coming rip.

Many of you have sent donations at the start of the month and my sincere thanks for each of you. Although I am not very active in the Twitter during the day, the blog has remained focused despite the setback from google and your help and support is more important than ever.

I hope we all will be able to make some money in the coming months. Just shut out the noise and remain patient.

Monday Musings.

Very soon the uncertainty as to who will guide America to bankruptcy will be over.  Some pundits are calling for a win for Romney and in the support of their prediction, they are showing the strength of the sectors which are supposed to be Republican friendly.  I suppose there is confirmation bias everywhere. I am sure Democrats are seeing signs of their victory as well. Irrespective of whoever wins, the market’s path has already been defined. If I may draw your attention to the fact that despite the sell- off of last Friday, the lows of September 26^th is still intact. SPX cash is grinding up and will most likely continue to grind up for till Op.Ex.

While we have an initial sell signal (not confirmed) the indices are oversold on s short term basis and odds are high that we will see a bounce.  We do not have a negative divergence yet for calling the top but we are coming close. The following chart shows the SPX position short term.

(H/T Lance Roberts).

Another 50-60 points melt up in the next 7-10 trading sessions are quite likely and possible but I am not risking my money to chase it.

NYSE Bullish Percent Index is showing a topping pattern.

As you can see, it takes time for this divergence to play out and therefore do not expect indices to roll over tomorrow. But warning signs are there.

While I am expecting a correction, I am not looking for the end of the world here, not yet. I expect a correction in the magnitude of 15%-20% between Mid-November to Mid-December.  If we get that, it will be time to get long again. And I have decided to stay out of Nat.Gas till this big correction plays out. The time to go long commodities will come by end of the year and that includes precious metal as well.

So right now I am in cash and cushy. I am not chasing the upside because I am not sure how far it will go. And it is better to wait out 7-10 trading sessions than to suffer heartburn.  Hope you guys are keeping your powder dry and doing your research.

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One Swallow Of Fall.

While it is true that one swallow does not make a summer, we have been calling for this bullish action for quite a while. It will be foolish to say that from now on prices will go up and up but it does look like the making of a short term bottom which the cycles have been calling for. SPX closed above 1425 which earlier was acting as a resistance. Let us see whether it holds tomorrow. Only folks who seem to be unhappy today are from our beloved rant blog. I shudder to think about the plight of anyone who was short after reading / listening to those unending rants. Few more times like these and when the time comes to really short, folks won’t have any money left to trade. Only GS and JPM will be able to short the market then. Brilliant plan indeed!

Tomorrow is a NFP day. Few have any idea if at all about how good or bad it will be but in reality, it does not matter. Most likely, markets will go up anyway to test the highs in the next few days/weeks, with occasional dips in between. So it does not matter if tomorrow is red or range bound, which is very likely, so long the red is not huge red. Only fly in the ointment today was that US$ was higher which resulted in gold and silver selling off from their morning highs.

But the silver miners like SLW and CDE have started to breakout even in this weak market.  I think both gold and silver will also move higher and test their respective high of the year. And all these should happen in the next two weeks. We will have to wait and see if gold is able to break through $ 1800. If not, we will get out of PM sector for a month and re- enter by mid or end December.

The next two weeks will possibly be good for swing traders. So far as investors are concerned, it would be a good idea to reduce the long positions on any strength and reduce the risk. And the risks are real. The fiscal cliff will not be sorted out before next year and there is no clear indication as to who is going to win the election. These are known unknowns and in times like these, cash is king. 

But from the swing trade point of view, I would probably buy out of money November calls for SPX that are cheap and get out by 12^th-14^th November.  But everyone has own style of trading and no one size fits all. So please do your due diligence.

Today QQQ was up almost 1.5% while Apple was up only 0.2%. Yesterday I wrote that Apple most likely has bottomed short term. If that is indeed the case and Apple is to test its 50 DMA it would mean a move of about 7%. That would definitely positively impact the Qs and other indices. The last high was on September 14 which was almost 45 days back and yet we had a tiny 5% correction. So we did not miss much by staying in the sideline. Also in all of those 45 days, we had two up moves and three down moves without any clear direction.  I had suggested not to short and hopefully it would have saved you some money.

Thanks for sharing my thoughts on the market. I have been busy with studies and waiting for the market to show its hand. So far things appear to be on script. I hope it will be interesting going forward and you will be able to make some much needed money.