The selling momentum of last Friday continued for better
part of today but the last hour was a good turnaround. DOW covered more than
100 points to close in green. In terms of chart pattern let us see the favourite
of the Boyz, /ES or emini (SPX futures).
The following is a 4 hour chart of /ES
This is the 2nd time /ES has bounced from 1420
level which is a good support and the last breakout happened from here. The
next line of defence is 1400 level. And
the indices still held the low of 10/12/2012. The cash SPX actually bounced off
the lower BB and is sitting just above the 50 DMA. Possibly the bears are
allowed only up-to this much for now.
The fundamentals are not that great. With corporate profits
down and fiscal cliff hanging in front, there are quite a bit of distributions going on for the last many trading days. Most likely smart money is getting out
before the uncertainty hits home. But the last bit of shenanigan is still ahead
of us and the Boyz will melt up the market for at least one more time.
Therefore it is time for patience and not the time for taking positions. I plan
to take a long position by end of October but not in any stock or indices. In
my view, the least risky trade would be short bond and therefore TBT.
As you know I am long term bullish on Gold and Silver. But
if Gold and Silver do not make new highs by mid-November, it may not be a bad
idea to step out for a short while. However, if you are not checking your
investment portfolio everyday and are comfortable to hold it for a long term,
then there is no need to hop in and out. In fact every weakness is an opportunity to
scale in.
Nat.Gas did sell off today. From $3.65, it closed at $3.44.
Yet it has not given the sell signal. It has to close below $3.40 for a
meaningful correction. I am waiting for it to correct some more for a good
entry.
Coming back to short term equities cycle, the 1st reading had
bottom around 24th October. Subsequently, 24th October
inverted to top and cycle bottom moved to end of October. In situations like these,
it is screaming confusion and the best course of action is no action at all.
The crystal ball is fairly clear after 29th/30th October
till mid- November and that is when I plan to take a long shot for a short
while.
Hope you have been in cash and cushy. Cash is the king in
times like these. Good opportunities are ahead of us and we have to keep our
emotions in check. If you were long, hope you did not close your position
because it will turn around very quickly. Problem is, none of these turn around
are for real.
We may see some more selling in a day or two but it does not
matter. Unless the bears break down 1400 with conviction in the coming few
trading sessions, we are looking for a swing high around 1480-1500 range by
mid-November.
That’s all for this Monday evening. Thanks for sharing my
thoughts. Be safe out there please.
Nailed natgas today at 3.62 and will add some more at 3.5
ReplyDeleteI don't think it's coming back anytime soon with such reversal.
My target is 2.9-3
Good move. I would be happy if it closes below $3.40. But I am looking to go long for a long time.
DeleteMaybe I'll hold it for long time too, if it continues to decline :) But most probably not, I think 3 will be most attractive to buy some.
ReplyDeleteI respect your analysis, I have been watching my cycles on the spy weekly and monthly chaRTS. I have been slowly adding to my sds for last month so as not to miss the down move. I was looking for END UP cycle approx. Oct 1 and a cycle bottom end of december which would correlate to a christmas rally. As John Mauldin indicated a while back we have been in a up business cycle for last 4 years and will not go on forever. Long term on monthly charts we are entering the downside of the cycle also. I try not to go with the shorter term cycles as I just get eaten up. Unfortunately i don't know how to attach my chart here or i would.I just use cycle brackets on TOS.I just sold half my position this morning and will see how the day ends and maybe add back at the end of the day. But nothing is perfect. I have refused to go long and lost out on the gains but as i see it there are to many world risk for me.Its not worth it to wake up to an attack on Iran or a Europe collapse. These are just my thoughts.
ReplyDeleteThanks. There is no harm is not chasing every opportunity. The cycles have been all over the place lately and sometimes conflicting. That is why I am on the sideline. I think we will get a better opportunity to short soon but the real deal is still far away. Not until mid-2013.
DeleteGood luck trading.
Interesting! What is holding the Q's from sinking as low as all the indexes, and AAPL?
ReplyDeleteIsn't it interesting!
DeleteI can only say that this not real. Cycles telling to wait on the sideline. May be Apple will blow away with its earning.
What will be even more interesting now, just looking at the major US indexes, is they look like they have some good room to the downside, looking at the weekly charts. As much money that goes in and out of the markets, how far can Ben's 40 billion a month go to paddle against a current. Maybe I am missing something here but everyone seems to be expecting a pre election rally to get Obama elected, I also think that wouldn't really change much, there really aren't that many people sitting on the fence. Lots of chatter.
ReplyDeleteWhat say you BB?
It all depends what is out time frame. For someone who is long from March 2009, this is just another correction.They would not bother much even with a 20% correction from here. For someone who has gone long after Ben announced QEInfinity, this is the end of the world.
DeleteThe selling that we have is short term and we still do not have major sell signals although Nasdaq is coming very close to it.
Today VIX closed outside its BB. And /ES tested its 2nd line of defence 1400. I think a bounce is due. One particular indicator that I follow is telling that we are going to move sideways from here till end of the month and rally thereafter.
So let us see how it plays out in the next few days.
I think SPX will close below 500 but that would come sometimes in 2014. We might see 1550 1st by May of 2013.
These are very long term projections and are just a guidelines. But that is the reason I am not joining the bear party yet. For now I think we will have a 20% correction after election.
Just curious, Obama or Romney? :)
ReplyDeleteI think it will be Bamar. But does it really matter. They both work for TBTF banks. Watch what they do, not what they say.
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