The ES found support yesterday at 1296 and has rallied 20+ points since then. Much of the positive sentiment has come after European leaders agreed to tighter budget rules designed to try to help nations avoid unsustainable debt costs. I can't help but find humor in this given that Portugal's 5 year treasury yields have soared to Euro-era highs of 22% and Greece is currently in a stalemate with private creditors on a debt swap agreement.
In any case, short-term action appears bullish, though the market continues to meander about on low volume so I'm not overly excited about much.
Below are the levels I am watching today on the ES:
Resistance above at: 1318-1319, 1325.50-1326.50
Support below at: 1308-1309, 1302-1303
Tuesday, January 31, 2012
Monday, January 30, 2012
Market Showing Weakness. Setting Up For Buying Opportunity
Following the Bullish FOMC statement from Wednesday, the ES has seen a short-term top after rallying 20+ points following the Fed announcement. Thursday's selling began with a disappointing New Homes Sale number, but that was really just an excuse to sell an overexhuberant and overbought market. A disappointing GDP number on Friday didn't provide any additional reason to buy the market. As I stated in my previous post, we should expect some fake-outs to the downside before the market continues to rally in what is a bullish environment. I continue to like longs at the 1287-1288 level on the ES. We probably won't see that level today, but we may see it tomorrow.
Levels to watch today on the ES:
Resistance above at: 1307-1308, 1315-1316
Support Below at: 1295.50-1296.50, 1287-1288
Levels to watch today on the ES:
Resistance above at: 1307-1308, 1315-1316
Support Below at: 1295.50-1296.50, 1287-1288
Thursday, January 26, 2012
Bernanke and the Fed Provide More Reason To Sell the Dollar and Get Your Risk On
It was good to see a little action in the markets yesterday. It has been awhile.
I wasn't expecting much from the FOMC Statement, but the Fed delivered some pretty big news. Keeping interest rates low until "at least" 2014 is very significant. This is essentially QE, because keeping interest rates low allows the US to meet its debt obligations at the expense of the US dollar. This is nothing new, we have known the Fed's policy was to keep rates low, Bernanke already stated they would keep rates low until 2013. By saying yesterday that the Fed would keep rates exceptionally low through at least 2014 is just the Fed's way of driving the point home. The markets reacted accordingly, with buying. Equities up, precious metals up, commodities up, dollar down.
The Fed is just reminding the world that they plan to do everything in their power to debase the US Dollar. When consumption is low, investment is low, unemployment is high and huge debt/lower tax revenue is preventing the government from spending freely, the next best alternative to try and stimulate an economy is to debase the currency to make exports more attractive. This is the current strategy the US is implementing.
It will continue to be bullish for the market. We may see some fake-out moves to the downside in the near term, but the market is heading higher. Dips are officially buying opportunities in my opinion. The S&P 500 may be on its way to break 1400 now.
Before I get overly optimistic on future price action, I want to offer the reminder that all is not well in the world and the market remains vulnerable. The European debt situation has not gone away. The tension with Iran has not gone away either and these issues will create reason to sell equities at some point.
In any case, the Fed's Announcement yesterday provided more wood for the bullish bonfire. I like buying the dips. I continue to watch the 1287-1288 price level on the ES. If we do see a move that low in the coming days, it should be a great buying opportunity.
I wasn't expecting much from the FOMC Statement, but the Fed delivered some pretty big news. Keeping interest rates low until "at least" 2014 is very significant. This is essentially QE, because keeping interest rates low allows the US to meet its debt obligations at the expense of the US dollar. This is nothing new, we have known the Fed's policy was to keep rates low, Bernanke already stated they would keep rates low until 2013. By saying yesterday that the Fed would keep rates exceptionally low through at least 2014 is just the Fed's way of driving the point home. The markets reacted accordingly, with buying. Equities up, precious metals up, commodities up, dollar down.
The Fed is just reminding the world that they plan to do everything in their power to debase the US Dollar. When consumption is low, investment is low, unemployment is high and huge debt/lower tax revenue is preventing the government from spending freely, the next best alternative to try and stimulate an economy is to debase the currency to make exports more attractive. This is the current strategy the US is implementing.
It will continue to be bullish for the market. We may see some fake-out moves to the downside in the near term, but the market is heading higher. Dips are officially buying opportunities in my opinion. The S&P 500 may be on its way to break 1400 now.
Before I get overly optimistic on future price action, I want to offer the reminder that all is not well in the world and the market remains vulnerable. The European debt situation has not gone away. The tension with Iran has not gone away either and these issues will create reason to sell equities at some point.
In any case, the Fed's Announcement yesterday provided more wood for the bullish bonfire. I like buying the dips. I continue to watch the 1287-1288 price level on the ES. If we do see a move that low in the coming days, it should be a great buying opportunity.
Wednesday, January 25, 2012
Watch FOMC Press Conference with Ben Bernanke Live Here 1/25/2012
12:30pm EST: FOMC rate decision and statement.
2:00pm EST: Forecasts released.
2:15pm EST: Fed Chairman Bernanke press conference. Watch Below:
Maybe we will see some increase in volume and volatility this afternoon following Bernanke's press conference. I will likely be watching from the sidelines until the market reacts and reveals sentiment.
If the market shows a negative reaction, I like support at 1295-1296 on the ES and even more so at 1287-1288 ES. On the opposite side, I like resistance at 1319-1320 and would likely short any rallies to that level.
2:00pm EST: Forecasts released.
2:15pm EST: Fed Chairman Bernanke press conference. Watch Below:
Maybe we will see some increase in volume and volatility this afternoon following Bernanke's press conference. I will likely be watching from the sidelines until the market reacts and reveals sentiment.
If the market shows a negative reaction, I like support at 1295-1296 on the ES and even more so at 1287-1288 ES. On the opposite side, I like resistance at 1319-1320 and would likely short any rallies to that level.
Friday, January 20, 2012
US Deficit Not a Problem? Borrowing More Money is the Way to Go?
Rick Santelli makes some interesting comments in response to a Wall Street Journal article by former Vice Chairmen of the Federal Reserve Alan Blinder titled Four Deficit Myths and a Frightening Fact. Santelli points out that "Just because the world is willing to loan the US money at low interest rates, doesn't mean we should take advantage of it."..."6 years ago some finance minister in Greece probably said the same thing. Don't worry about deficits or debt, if the world is willing to lend us money, we would be fools not to take advantage of it."
Central planners in Greece couldn't say no to all the loans offered to it over the past decade. Is the United States the next Greece?
The United States would already be Greece if we didn't have the ability to print money and buy our own bonds when nobody else would. Eventually though, even the US will have to face the consequences of irresponsible debt creation. I thought "Kick the Can" (down the road) was a children's game, apparently policy makers around the world continue to play... I think we know that all games must eventually end.
Central planners in Greece couldn't say no to all the loans offered to it over the past decade. Is the United States the next Greece?
The United States would already be Greece if we didn't have the ability to print money and buy our own bonds when nobody else would. Eventually though, even the US will have to face the consequences of irresponsible debt creation. I thought "Kick the Can" (down the road) was a children's game, apparently policy makers around the world continue to play... I think we know that all games must eventually end.
Thursday, January 19, 2012
Market Extends Upward Move, Now Trading Above Key Resistance
Bulls have maintained momentum above the key 1290s resistance zone (ES) on what continues to be low volume in 2012. I expect higher highs going forward, but I will continue to sell rallies with confidence. The only difference is that I will not be looking for sustained moves lower, at least for now. It is likely that the ES could chop its way back up toward the 2011 highs (1356.50). In the process there will be plenty of opportunity to be both long and short in this market, but the next best swing-short opportunity may not come until March.
Levels to watch today on the ES:
Resistance above at: 1309-1310, 1314-1315
Support below at: 1299-1300, 1295-1296
Levels to watch today on the ES:
Resistance above at: 1309-1310, 1314-1315
Support below at: 1299-1300, 1295-1296
Tuesday, January 17, 2012
Better Than Expected Chinese Q4 GDP Pushes Markets Higher
Futures got a boost overnight as ES climed as high as 1302.50. This is 12.5 points higher than Friday's close, which was already on the heels of a 17 point rally.
The chief catalyst for this bullish action is China. Chinese 4th Quarter GDP rose to 8.9%, surpassing expectations of 8.6%-8.7%. This is still a decline from the 4th Quarter one year ago, but it is less of a decline than expected and the market has responded well to that. Clearly concerns over a slowing China are much more significant than the S&P downgrade of France, Italy, Spain and yesterday's S&P downgrade of the EFSF rating to AA+ from AAA. The poor health of the Eurozone countries as well as the poorly conceived stabilization mechanisms designed to bail them out are already priced into the market.
The Euro saw a significant rally following the China GDP numbers as did European equity markets. This just goes to show how important the health of the Chinese economy is to the Western world.
As for my bearish sentiment; We have now pierced the top of my key resistance zone at 1300 ES. This does not mean the bearish case is over yet, but I am turning neutral in the short-term until the market shows its hand further. I still like selling rallies for short-term profits, but we will have to wait and see if there is potential for any sustained downside action.
Levels to watch today on the ES:
Resistance above at 1302-1304
Support below at 1292-1293, 1287-1289
The chief catalyst for this bullish action is China. Chinese 4th Quarter GDP rose to 8.9%, surpassing expectations of 8.6%-8.7%. This is still a decline from the 4th Quarter one year ago, but it is less of a decline than expected and the market has responded well to that. Clearly concerns over a slowing China are much more significant than the S&P downgrade of France, Italy, Spain and yesterday's S&P downgrade of the EFSF rating to AA+ from AAA. The poor health of the Eurozone countries as well as the poorly conceived stabilization mechanisms designed to bail them out are already priced into the market.
The Euro saw a significant rally following the China GDP numbers as did European equity markets. This just goes to show how important the health of the Chinese economy is to the Western world.
As for my bearish sentiment; We have now pierced the top of my key resistance zone at 1300 ES. This does not mean the bearish case is over yet, but I am turning neutral in the short-term until the market shows its hand further. I still like selling rallies for short-term profits, but we will have to wait and see if there is potential for any sustained downside action.
Levels to watch today on the ES:
Resistance above at 1302-1304
Support below at 1292-1293, 1287-1289
Friday, January 13, 2012
1290s Resistance Continues to Hold Up
1290s resistance continues to provide profit opportunities. First test of the 1290s happened on Tuesday seeing a 10+ point move off the 1290 level. Next test came yesterday as the ES pushed into the mid 1290s in the early morning reversing downward to provide potential gains of 15+ points. Again last night the ES managed to move back up to 1295 and has now traded 15+ points lower.
As I stated previously, I didn't expect a straight move down off this key resistance, but that moves to the downside would be followed by reversals to the upside. So far this has been the case as the markets continue to consolidate. I expect the larger move down to begin next week and the highs may already be in. That being said, we should see a bounce again here (at 1280-1281 ES) following the selling of the news that the Federal Deficit has widened. JPM earnings fell in at .90c/share versus estimates of .92c/share. We'll see if the JPM conference call (in progress) has an impact. If we do not get a bounce here off the 1280 level, expect a move down to 1274-1275 next.
As I stated previously, I didn't expect a straight move down off this key resistance, but that moves to the downside would be followed by reversals to the upside. So far this has been the case as the markets continue to consolidate. I expect the larger move down to begin next week and the highs may already be in. That being said, we should see a bounce again here (at 1280-1281 ES) following the selling of the news that the Federal Deficit has widened. JPM earnings fell in at .90c/share versus estimates of .92c/share. We'll see if the JPM conference call (in progress) has an impact. If we do not get a bounce here off the 1280 level, expect a move down to 1274-1275 next.
Thursday, January 12, 2012
Market Up Ahead of Jobless Claims. Preparing for Short Entries
ES traded as high as 1297.50 in overnight trading with EURUSD up as high as 1.277 after Italian T-Bills raised roughly double the EUR 5 bln target.
Jobless claims and retail sales to be released shortly.
I continue to like short entries here in the mid 1290s, though entries here are quite aggressive as there has been no technical signal of a top and trading participation is low. Regardless, I expect the highs are close to being in. As long as we don't see consecutive daily closes over 1300 ES, I will be biased to the downside.
Waiting on the jobless claims numbers now.
Jobless claims and retail sales to be released shortly.
I continue to like short entries here in the mid 1290s, though entries here are quite aggressive as there has been no technical signal of a top and trading participation is low. Regardless, I expect the highs are close to being in. As long as we don't see consecutive daily closes over 1300 ES, I will be biased to the downside.
Waiting on the jobless claims numbers now.
Tuesday, January 10, 2012
Bullish Action but Hitting Lower Part of Resistance Range
ES currently trading 14 points above yesterday's close as the immediate trend is up. At the same time the ES is now testing the lower part of the key resistance range between 1290-1300
I expect at least a 40 point move off this price range when it turns down.
Earnings season is upon us and it will be important to see how companies report. If earnings are consistently strong and are beating estimates, markets will likely break through the above mentioned resistance and then attempt to remain above 1300. Something to keep an eye on.
Levels to watch today on the ES:
Resistance above at 1290-1291.50, 1294-1296.
I like shorts off both these levels.
Support below at 1282-1283, 1275-1276
Only day-trades or scalps until the current bullish action subsides.
We may have to wait until next week to see the more significant down move begin.
I expect at least a 40 point move off this price range when it turns down.
Earnings season is upon us and it will be important to see how companies report. If earnings are consistently strong and are beating estimates, markets will likely break through the above mentioned resistance and then attempt to remain above 1300. Something to keep an eye on.
Levels to watch today on the ES:
Resistance above at 1290-1291.50, 1294-1296.
I like shorts off both these levels.
Support below at 1282-1283, 1275-1276
Only day-trades or scalps until the current bullish action subsides.
We may have to wait until next week to see the more significant down move begin.
Sunday, January 8, 2012
My Initial Thoughts on What to Expect in 2012
Hope everyone had a nice holiday season. I'm finally back with my first post of 2012 where I will summarize my thoughts on the current state of the markets and what I expect looking forward.
Buy and hold is dead, but expecting a double dip decline is also foolish. There should be plenty of opportunity this year as both a bull and as a bear. Expect continued volatility as the year unfolds.
RIGHT NOW:
There is major resistance overhead and I am bearish. The Dow and the S&P 500 have not yet signaled a return to bullish sentiment (technically) since the sell-off began last August. The fact is that the first week of August 2011 signaled a break of two major bullish support trend-lines. That introduced the beginning of a bearish cycle. Yes, the immediate trend is up when you look at the higher lows dating back to the early October pivot low, but the markets are hitting a wall overhead right now.
Action in the US dollar supports this view. The dollar is showing strength and is poised to move higher. A lot of this strength is in relation to a weak Euro, but regardless, a rising dollar is not good for US equity markets.
The UUP has already broken out above prior resistance. I expect it is on its way to 23.25-23.50.
The EURUSD has now broken down below prior support. I expect EURUSD is now on its way to 1.25. Resistance above needs to hold at 1.283-1.287 for this to confirm.
The dollar index ($DXY) has not yet confirmed a breakout. It is currently sitting just below resistance at 81.30-81.45. When the $DXY closes above 81.45, that should be confirmation that the dollar is indeed headed higher and that US equities will head lower.
Although there is significant resistance overhead in US equities, that doesn't mean the market is going to bounce off and go straight down. Any good short opportunity will typically prove difficult to take advantage of. It is only normal to see fake-out moves to the downside followed by reversals to the upside. This is when the weaker hands get shaken out. You can already see this happening as the markets have chopped up and down over the first week to begin the year. I wouldn't be surprised to see more consolidation before the market declines. Regardless I prefer selling the rallies right now.
LEVELS TO WATCH:
Key Resistance on the ES:
We have the double-top from 10/27/11 at 1283.50. ES came close to that on Friday trading up to 1282.25 following a positive unemployment number.
Bearish outlook still in play even if this double-top is broken.
Next line of resistance is 1291-1295. This price range could easily be tested. I especially like shorts in this range. 1290-1300 ES is very significant and will act as a formidable wall against higher highs. Any price action above this range will need to be immediately rejected for bearish confidence to remain in play. If ES trades up into that price range, I will be looking to enter a swing-short position with confidence.
In terms of support on the ES, once the ES turns down, expect a first target to the downside at 1249-1252. I'll wait to see the timing of this move and the subsequent price action before I give further levels to the downside.
There are fundamental economic concerns across the globe that support the technical bearishness I have outlined above.
First of all, the Eurozone debt crisis has not gone away. Greece is likely to leave the Euro without less stringent austerity measures. A solution to pay off Italian, Spanish and other PIG countries debts are nowhere near being reached. Pyramid debt instruments like SPVs, EFSF bonds and other newly created schemes have failed to lure in more money. High yields remain a problem in the Eurozone. Central banks continue to resist the temptation to print more money (at least that is the attitude they express publicly). If they don't print and European leaders do not find buyers for their bonds and other debt instruments, deflation will prevail and equity markets will decline.
Debt Ceiling will be an issue again here in the US as the government is now less than $25 million away from hitting the revised number from August of last year.
Tensions mounting with Iran. If the US, Israel or NATO invades Iran, oil prices will go up. If oil tankers were prevented from passing through the straight of Hormuz, oil prices would sky-rocket and equity markets would sell in the same wave of panic.
Interest rates are as low as they can go in the US, even lower than they were following the 2008 crash. There is no more room to lower interest rates further if/when times get tougher.
With all the bad news in 2011, the S&P 500 is only 75 points off its post 2008 highs. I would lean towards the attitude that positive US economic news like declining unemployment numbers and increased manufacturing numbers are already priced into the markets. Without more QE, further upside is limited while the downside potential is ripe for the picking.
We are currently experiencing the greatest debt bubble in history. I can't say exactly when this bubble will officially burst, but you can't grow an economy on credit forever and you can't continue to increase debt without suffering consequences at some point. Will the debt bubble burst within the next year or in the next 10 years? I don't know. Predicting economic events is not the hard part, it is getting the timing right that is difficult. All we can do is trade the "now" and hope to be in good position to take advantage of future market moves and not get caught on the wrong side of disaster.
To close, I want to touch on how bad things could get this year. Assuming the bearish action does play out in the first half of 2012, I don't expect significant escalation to the downside. The worst case scenario would be around 950 on the S&P 500 (don't get me wrong, that would be significant, but it would be unlikely for things to get worse than that). If price was to fall that low, it would provide a tremendous buying opportunity. When things get bad enough, central banks will resume some form of QE or money printing that will put a floor underneath the markets. Lets not forget this is an election year in the United States. The Obama administration knows that a healthy stock market will increase the likelihood of a second term in office. They will do everything in their power to ensure that is the case.
I will conclude this post now before it gets too long... more to come... best of luck to all as we enter what will most definitely be an interesting year.
Buy and hold is dead, but expecting a double dip decline is also foolish. There should be plenty of opportunity this year as both a bull and as a bear. Expect continued volatility as the year unfolds.
RIGHT NOW:
There is major resistance overhead and I am bearish. The Dow and the S&P 500 have not yet signaled a return to bullish sentiment (technically) since the sell-off began last August. The fact is that the first week of August 2011 signaled a break of two major bullish support trend-lines. That introduced the beginning of a bearish cycle. Yes, the immediate trend is up when you look at the higher lows dating back to the early October pivot low, but the markets are hitting a wall overhead right now.
Action in the US dollar supports this view. The dollar is showing strength and is poised to move higher. A lot of this strength is in relation to a weak Euro, but regardless, a rising dollar is not good for US equity markets.
The UUP has already broken out above prior resistance. I expect it is on its way to 23.25-23.50.
The EURUSD has now broken down below prior support. I expect EURUSD is now on its way to 1.25. Resistance above needs to hold at 1.283-1.287 for this to confirm.
The dollar index ($DXY) has not yet confirmed a breakout. It is currently sitting just below resistance at 81.30-81.45. When the $DXY closes above 81.45, that should be confirmation that the dollar is indeed headed higher and that US equities will head lower.
Although there is significant resistance overhead in US equities, that doesn't mean the market is going to bounce off and go straight down. Any good short opportunity will typically prove difficult to take advantage of. It is only normal to see fake-out moves to the downside followed by reversals to the upside. This is when the weaker hands get shaken out. You can already see this happening as the markets have chopped up and down over the first week to begin the year. I wouldn't be surprised to see more consolidation before the market declines. Regardless I prefer selling the rallies right now.
LEVELS TO WATCH:
Key Resistance on the ES:
We have the double-top from 10/27/11 at 1283.50. ES came close to that on Friday trading up to 1282.25 following a positive unemployment number.
Bearish outlook still in play even if this double-top is broken.
Next line of resistance is 1291-1295. This price range could easily be tested. I especially like shorts in this range. 1290-1300 ES is very significant and will act as a formidable wall against higher highs. Any price action above this range will need to be immediately rejected for bearish confidence to remain in play. If ES trades up into that price range, I will be looking to enter a swing-short position with confidence.
In terms of support on the ES, once the ES turns down, expect a first target to the downside at 1249-1252. I'll wait to see the timing of this move and the subsequent price action before I give further levels to the downside.
There are fundamental economic concerns across the globe that support the technical bearishness I have outlined above.
First of all, the Eurozone debt crisis has not gone away. Greece is likely to leave the Euro without less stringent austerity measures. A solution to pay off Italian, Spanish and other PIG countries debts are nowhere near being reached. Pyramid debt instruments like SPVs, EFSF bonds and other newly created schemes have failed to lure in more money. High yields remain a problem in the Eurozone. Central banks continue to resist the temptation to print more money (at least that is the attitude they express publicly). If they don't print and European leaders do not find buyers for their bonds and other debt instruments, deflation will prevail and equity markets will decline.
Debt Ceiling will be an issue again here in the US as the government is now less than $25 million away from hitting the revised number from August of last year.
Tensions mounting with Iran. If the US, Israel or NATO invades Iran, oil prices will go up. If oil tankers were prevented from passing through the straight of Hormuz, oil prices would sky-rocket and equity markets would sell in the same wave of panic.
Interest rates are as low as they can go in the US, even lower than they were following the 2008 crash. There is no more room to lower interest rates further if/when times get tougher.
With all the bad news in 2011, the S&P 500 is only 75 points off its post 2008 highs. I would lean towards the attitude that positive US economic news like declining unemployment numbers and increased manufacturing numbers are already priced into the markets. Without more QE, further upside is limited while the downside potential is ripe for the picking.
We are currently experiencing the greatest debt bubble in history. I can't say exactly when this bubble will officially burst, but you can't grow an economy on credit forever and you can't continue to increase debt without suffering consequences at some point. Will the debt bubble burst within the next year or in the next 10 years? I don't know. Predicting economic events is not the hard part, it is getting the timing right that is difficult. All we can do is trade the "now" and hope to be in good position to take advantage of future market moves and not get caught on the wrong side of disaster.
To close, I want to touch on how bad things could get this year. Assuming the bearish action does play out in the first half of 2012, I don't expect significant escalation to the downside. The worst case scenario would be around 950 on the S&P 500 (don't get me wrong, that would be significant, but it would be unlikely for things to get worse than that). If price was to fall that low, it would provide a tremendous buying opportunity. When things get bad enough, central banks will resume some form of QE or money printing that will put a floor underneath the markets. Lets not forget this is an election year in the United States. The Obama administration knows that a healthy stock market will increase the likelihood of a second term in office. They will do everything in their power to ensure that is the case.
I will conclude this post now before it gets too long... more to come... best of luck to all as we enter what will most definitely be an interesting year.
Subscribe to:
Posts (Atom)
