A few brief notes. The gdx over the past few days has rallied strongly and is approaching its resistance point at 33.87. S o far so good.
The spy continues to hug the lows of its 3 week trading range. That fact alone is bearish showing absence of demand. Rollo Tape in his justly famous book mentions that the response to news frequently predicts which way the market will leave a trading range. The really, really big news was the Feds commitment to quantitative easing and zero percent interest rates. These one would expect would trigger buying. I believe i described how the demand that followed this announcement spent itself quickly. It has never returned. What hopefully would have triggered buying, triggered yawns and vacations. The market can change its mind whenever it wants, but so far the big bazooka has been a big dud. The implications are bearish.
Monday, December 29, 2008
Thursday, December 25, 2008
MARKETS 12/24/08
The spy rallied all day with the only significant break on the close. The volume on this holiday shortened day was very light. There was little selling pressure and especially in light of the last few posts, I would have to say that demand aqain failed to enter the market.
I want to pick up with yesterday's post concerning the dollar. I want to emphasize that the significant market event from my point of view in December 2008 was the largest range in the dollar index in 14 years. Whether this was due to quantitative easing or the temporary abeyance of hedge fund liquidation, and repatriation of dollar loans, I do not know, nor do I particularly care. It could be both, it could be neither. It might not even be knowable. With this singularly large range, the markets own action tells us its likely future. That future contains a dollar crisis. It might not be tomorrow or next week, but this range is like an earthquake tremor. It tells us that our house is built on a large unstable fault. For whatever reason we might have thought the fault was present, but now we know. Because of incipient dollar weakness today I want to look at the gold stock index gdx.
The gdx bottomed 10/23 - 10/28 on high but not extreme volume. The market then rallied to its support/resistance at 24.68.
The volume on this rally was as good as the last stage of the decline to 10/23. Just as in the es when we saw on the intraday the change from demand in control to supply in control on the gdx over these two weeks we just saw the opposite except it is on a daily chart. The demand petered out 11/5 and prices fell on suspiciously high volume (indicating some hidden support) on 11/6. Prices then rallied to 11/10 with demand drying up, small range and low volume. Prices now gapped down the next two days in a row but the volume never rose to the level of the liquidation ending 10/23, 1024. The force of selling was now receding. 11/13 was an outside key reversal day with a large volume and a 4 point range from low to high. This very large range tells us that the line of least resistance is up. The low of 11/13 is tested in a successful spring one week later 11/20. The true range 11/21 is an even larger five points. The sharp upward move with high volume of 11/21 and 11/24 constitute a sign of strength. The market is now telling us by its own action that it will go up far more easily than it will go down. We now run into resistance above the high of 11/10 and beneath an area of old lows. Prices again fall back and the market's battle between sellers and buyers is resolved by a spring 12/05 with a close at the top. The bullish action is now unmistakable and prices rally 60% over a week and a half. 12/16 the ascent becomes vertical on very high volume and a range of 2 1/2 points. There is some profit taking on the advance and 12/17 we have a reversal day. Prices fall sharply on high volume with a close above the lows 12/18, and 12/19 there was no downside followed through. !2/19 had virtually the same volume but a much smaller range than 12/18 , demonstrating good support. As a result prices gapped higher the next morning only to sell off, closing at the low, Volume is half the level of 12/17 and 12/18 telling us that the force of supply is now diminishing. Prices are supported the 23rd and 24th on narrow inside days with closes near the top. The lows of the 19th through the 24th are gradually rising. A tremendous amount of supply was offered between 12/16 and 12/19. Price gave up far less than 50% of the rally of 12/05-12/17 and have not even fallen back to the breakout level of 24.77 This selling was taken by buyers and when the selling is done prices should resume their advance.
I want to pick up with yesterday's post concerning the dollar. I want to emphasize that the significant market event from my point of view in December 2008 was the largest range in the dollar index in 14 years. Whether this was due to quantitative easing or the temporary abeyance of hedge fund liquidation, and repatriation of dollar loans, I do not know, nor do I particularly care. It could be both, it could be neither. It might not even be knowable. With this singularly large range, the markets own action tells us its likely future. That future contains a dollar crisis. It might not be tomorrow or next week, but this range is like an earthquake tremor. It tells us that our house is built on a large unstable fault. For whatever reason we might have thought the fault was present, but now we know. Because of incipient dollar weakness today I want to look at the gold stock index gdx.
The gdx bottomed 10/23 - 10/28 on high but not extreme volume. The market then rallied to its support/resistance at 24.68.
The volume on this rally was as good as the last stage of the decline to 10/23. Just as in the es when we saw on the intraday the change from demand in control to supply in control on the gdx over these two weeks we just saw the opposite except it is on a daily chart. The demand petered out 11/5 and prices fell on suspiciously high volume (indicating some hidden support) on 11/6. Prices then rallied to 11/10 with demand drying up, small range and low volume. Prices now gapped down the next two days in a row but the volume never rose to the level of the liquidation ending 10/23, 1024. The force of selling was now receding. 11/13 was an outside key reversal day with a large volume and a 4 point range from low to high. This very large range tells us that the line of least resistance is up. The low of 11/13 is tested in a successful spring one week later 11/20. The true range 11/21 is an even larger five points. The sharp upward move with high volume of 11/21 and 11/24 constitute a sign of strength. The market is now telling us by its own action that it will go up far more easily than it will go down. We now run into resistance above the high of 11/10 and beneath an area of old lows. Prices again fall back and the market's battle between sellers and buyers is resolved by a spring 12/05 with a close at the top. The bullish action is now unmistakable and prices rally 60% over a week and a half. 12/16 the ascent becomes vertical on very high volume and a range of 2 1/2 points. There is some profit taking on the advance and 12/17 we have a reversal day. Prices fall sharply on high volume with a close above the lows 12/18, and 12/19 there was no downside followed through. !2/19 had virtually the same volume but a much smaller range than 12/18 , demonstrating good support. As a result prices gapped higher the next morning only to sell off, closing at the low, Volume is half the level of 12/17 and 12/18 telling us that the force of supply is now diminishing. Prices are supported the 23rd and 24th on narrow inside days with closes near the top. The lows of the 19th through the 24th are gradually rising. A tremendous amount of supply was offered between 12/16 and 12/19. Price gave up far less than 50% of the rally of 12/05-12/17 and have not even fallen back to the breakout level of 24.77 This selling was taken by buyers and when the selling is done prices should resume their advance.
Tuesday, December 23, 2008
MARKETS 12/23/08
In the es today, every rally attempt had an upthrust and then promptly failed. No upside volume was generated all day and the close of the small range, indicating no buying interest, was near the lows. We are now hugging the low of the trading range of the past 2 weeks and a breakdown seems imminent.
I wanted to return to a discussion of the Dx. Since our last discussion the dx moved sharply lower and has now rallied to its support/now resistance, at 83.5. What is absolutely crucial in this move is to see that the extent of the down move implies something very significant is afoot. The range of the down bar in 12/2008 is the largest range of any monthly bar in at least 14 years. It fell quickly and easily. The line of least resistance is lower. This large range broadcasts to all who will listen that the long anticipated dollar crisis will occur. We have three closes, all within a fraction of a point indicates supply overcoming any demand. The supply enters about 1% below the resistance which means the demand is not sufficient to lift prices even that high.
Despite repeated bouts of selling, the euro fx intraday, has made a series of higher lows in a narrow trading range so far this week. This indicates accumulation. The accumulation is occurring at a long term support line of around 138. That the euro has only retraced 50% of the move up from its breakout at 131 or so is very bullish.
While the euro has been relatively flat in its three day trading range, the Swiss franc has rallied these three days, although not making a new high. Based on this action, the Swiss franc is the strongest of the currencies and could on this retracement be bought.
The yen is also back at support as is the pound. The latter fell on virtually no selling and narrowing ranges. Perhaps the pound is completing its accumulation as well. While stronger than the dollar, it is the weakest of the currencies I am commenting on.
Gold had a spring with a close in the middle of the range.
The profit taking after a large move in gold and currencies seems complete and the dollar's fall will soon resume.
I wanted to return to a discussion of the Dx. Since our last discussion the dx moved sharply lower and has now rallied to its support/now resistance, at 83.5. What is absolutely crucial in this move is to see that the extent of the down move implies something very significant is afoot. The range of the down bar in 12/2008 is the largest range of any monthly bar in at least 14 years. It fell quickly and easily. The line of least resistance is lower. This large range broadcasts to all who will listen that the long anticipated dollar crisis will occur. We have three closes, all within a fraction of a point indicates supply overcoming any demand. The supply enters about 1% below the resistance which means the demand is not sufficient to lift prices even that high.
Despite repeated bouts of selling, the euro fx intraday, has made a series of higher lows in a narrow trading range so far this week. This indicates accumulation. The accumulation is occurring at a long term support line of around 138. That the euro has only retraced 50% of the move up from its breakout at 131 or so is very bullish.
While the euro has been relatively flat in its three day trading range, the Swiss franc has rallied these three days, although not making a new high. Based on this action, the Swiss franc is the strongest of the currencies and could on this retracement be bought.
The yen is also back at support as is the pound. The latter fell on virtually no selling and narrowing ranges. Perhaps the pound is completing its accumulation as well. While stronger than the dollar, it is the weakest of the currencies I am commenting on.
Gold had a spring with a close in the middle of the range.
The profit taking after a large move in gold and currencies seems complete and the dollar's fall will soon resume.
marKETS 12/22/08
Due to the holiday, I do not have time for a detailed post. However the e mini fell all day until the the last half hour or so. At that time it erased half of its losses for the day. Most days support has entered the market in the last 30 minutes or so for about a week. The volume 12/22 in the last 30-40 minutes was the least and most sporadic. Any serious buying would have lifted prices much higher. Despite the close in the middle, i would have to say we still have seen no significant demand and the likelihood is for lower prices.
Saturday, December 20, 2008
MARKETS 12/19/08
To continue briefly with our last post. The daily SPY had a rally attempt that failed. It failed to make a new high for the move and it failed to even edge the high of Thursday. Closing 0.1 points above the low of the day, for the second day in a row, there was no buying interest. One can make Christmas excuses for the market, but in my experience the charts speak for themselves, and unless something changes like very significant demand entering the market, the top of this rally is in. The rally that began 11/21/08 ended 12/08. The high was tested 12/17 and failed to generate any buying interest. We now have three days in a row with either no buying interest or supply dominant. Closes were at or near their lows three days in a row emphasizing weakness.
Prices have moved to an apex in this trading range and a break to support at 820 could begin shortly.
Just a few notes:
1) The various gold indexes are as strong as T-Bills or Long Term Treasuries on Decisionpoint.com. This is very telling.
2) The various financial indexes and ETFs continue to be very weak
3) Citigroup is in trouble again and alone of the major financial stocks is hugging the lows of its range. The next big problem could be here again.
Prices have moved to an apex in this trading range and a break to support at 820 could begin shortly.
Just a few notes:
1) The various gold indexes are as strong as T-Bills or Long Term Treasuries on Decisionpoint.com. This is very telling.
2) The various financial indexes and ETFs continue to be very weak
3) Citigroup is in trouble again and alone of the major financial stocks is hugging the lows of its range. The next big problem could be here again.
Thursday, December 18, 2008
MARKETS 12/18/08
Tonight I thought we would go over the intra day snp chart, 5 min, for the past few days as I believe there is evidence of a significant turn. First let us look at the daily Spy chart. As i previously pointed out, the volume was diminishing on each successive day that prices rose and yesterday we made a new high on markedly lower volume. Today prices turned down and for the first time in this trading range the volume increased. In other words, demand had petered out and today supply controlled the market and prices fell. We can see the same thing on the intraday chart of the e mini.
After the fomc meeting price and volume rose sharply. We see two successive trading ranges both with high volume followed by a breakout on the highest volume of the day ending at 3 pm(on the 5 min. chart). Even with the very high volume we could not muster a close above the trading range beginning at 2:25. Supply was entering and overcoming the demand generated by the news from the fomc meeting. This was further emphasized in the bar ending at 3:05 with its low end close and high volume.
Not surprisingly prices opened sharply lower the next morning. We found support at 894.50 and ground higher on a fraction of the demand we saw Tuesday. Eventually we upthrusted Tuesday's high with no substantial short covering or new buying interest.We fell back slightly and again attempted to rally on even less volume. This ended with a reversal bar at 1:20 and in the next 25 minutes volume rose, and we reversed the the 90 min of grind upwards to the day's high. The ease of movement was down. We rallied on sporadic volume until 2:20 and fell on steady and increasing volume. All of the rallies were contained by the zone of distribution above 913.25. The last two bar rally was followed by the sharpest and highest volume decline of the day.
Thursday opened with a weak rally and then a decline on higher volume than the opening two bars to 898.25. We slowly rallied back and upthrusted in a reversal bar the peak at 8:40 and then fell back. All rallies until 12:20 were characterized by pathetic volume. After the 12:20 upthrust which confirmed the absolute lack of demand, the sell off began. Supply was in control until 2:30 at which time some demand entered the market. I believe that large supply pressure was hidden in this last 30 min rally as the upward result is not proportional to the upward effort. The ease of movement is not present on the rally like the decline meaning that the line of least resistance is still down.
I hope i have shown how a market changes from being controlled by buyers to being controlled by sellers with the result being a possible change in trend. As I mentioned in an earlier post, this change in trend could be very significant.
I do not believe that supply was nearly as dominant today in the euro fx or gold but we are out of time for this post.
w
After the fomc meeting price and volume rose sharply. We see two successive trading ranges both with high volume followed by a breakout on the highest volume of the day ending at 3 pm(on the 5 min. chart). Even with the very high volume we could not muster a close above the trading range beginning at 2:25. Supply was entering and overcoming the demand generated by the news from the fomc meeting. This was further emphasized in the bar ending at 3:05 with its low end close and high volume.
Not surprisingly prices opened sharply lower the next morning. We found support at 894.50 and ground higher on a fraction of the demand we saw Tuesday. Eventually we upthrusted Tuesday's high with no substantial short covering or new buying interest.We fell back slightly and again attempted to rally on even less volume. This ended with a reversal bar at 1:20 and in the next 25 minutes volume rose, and we reversed the the 90 min of grind upwards to the day's high. The ease of movement was down. We rallied on sporadic volume until 2:20 and fell on steady and increasing volume. All of the rallies were contained by the zone of distribution above 913.25. The last two bar rally was followed by the sharpest and highest volume decline of the day.
Thursday opened with a weak rally and then a decline on higher volume than the opening two bars to 898.25. We slowly rallied back and upthrusted in a reversal bar the peak at 8:40 and then fell back. All rallies until 12:20 were characterized by pathetic volume. After the 12:20 upthrust which confirmed the absolute lack of demand, the sell off began. Supply was in control until 2:30 at which time some demand entered the market. I believe that large supply pressure was hidden in this last 30 min rally as the upward result is not proportional to the upward effort. The ease of movement is not present on the rally like the decline meaning that the line of least resistance is still down.
I hope i have shown how a market changes from being controlled by buyers to being controlled by sellers with the result being a possible change in trend. As I mentioned in an earlier post, this change in trend could be very significant.
I do not believe that supply was nearly as dominant today in the euro fx or gold but we are out of time for this post.
w
Wednesday, December 17, 2008
MARKETS 12/17/08
The SPY upthrusted the previous high of 12/8 on its lowest volume rally so far. It fell back to close in the middle of a narrow range. Although this poor behavior can be reversed, caution and early short sales which are very low risk must be recommended.
Any gap down opening would be especially serious and confirm the lack of demand for stocks evident today. A power down day will seal the fate of this market. While all of this can be reversed and an up move begin, caution for now.
The dx i believe just had its worst 6 days ever. One can only wonder what will happen to liquidity if this continues. It shows no sign of stopping.
Any gap down opening would be especially serious and confirm the lack of demand for stocks evident today. A power down day will seal the fate of this market. While all of this can be reversed and an up move begin, caution for now.
The dx i believe just had its worst 6 days ever. One can only wonder what will happen to liquidity if this continues. It shows no sign of stopping.
Tuesday, December 16, 2008
MARKETS 12/16/08
SPY--Today requires a reappraisal of the previous bullish and the neutral posts on the snp. The spy bottomed on very high volume at 74.34 and then rallied on diminishing volume to 90. It then fell on low volume for a secondary test 12/1 and then rallied on diminishing volume to 12/8. We had another secondary test on 12/12 and today 12/16 rallied on the least volume in December so far. The slope of the volume the entire month so far has been down. This is clearly a warning that demand is petering out and the high of 12/8 must be watched carefully for an upthrust. A fall from here will be very sharp indeed.
The dollar and gold did as predicted and have entered the marking up phase of their moves. We must watch if at zero per cent interest rates foreign funding of our debt dries up, given a sharply falling dollar. Very telling in this regard is the rise of the yen.
As already described, there is much evidence in the charts that hedge fund liquidation is currently on hold, but the yen continues to rise sharply. Perhaps Japanese investors realize they can get 0% at home as well as here, but without the currency risk. If so we are about to enter a currency crisis as well as a banking crisis and a new stage.
The dollar and gold did as predicted and have entered the marking up phase of their moves. We must watch if at zero per cent interest rates foreign funding of our debt dries up, given a sharply falling dollar. Very telling in this regard is the rise of the yen.
As already described, there is much evidence in the charts that hedge fund liquidation is currently on hold, but the yen continues to rise sharply. Perhaps Japanese investors realize they can get 0% at home as well as here, but without the currency risk. If so we are about to enter a currency crisis as well as a banking crisis and a new stage.
Monday, December 15, 2008
MARKETS 12/15
The snp definitely failed to follow through on the upside. Whether this is a failed rally or another test cannot be determined. Possibly the market is on the hinge and the lack of selling would have to be considered bullish. Would not bet much on it however.
Like the dollar index, the gold market is speaking clearly. On 10/24 the market, after a sharp sell-off, had an outside key reversal day followed by a test the next day. An automatic rally ensued which resolved into a trading range between 10/31 and 11/11.
This was notable for the contraction of volume on two down days 11/3 and 11/7 showing supply drying up. This was followed by a 2 day spring 11/12 and 11/13. The latter being a reversal day. Support was evident 11/17-11/20 and a sign of strength followed with the high volume large range breakout 11/21. This breakout too was tested and resolved by the two day spring 12/05 and 12/08. Since then the rally has been almost 100 dollars without any serious reaction on the daily chart. We are now at resistance and have barely closed above it. This is a dangerous point, but there has been little negative in the chart so further upside can be anticipated. Again fund liquidation in gold seems to have ceased since 11/20 on the intraday chart. And we have moved up on relatively little buying. Tomorrow is the fomc meeting and interest rates will probably be even closer to zero. Why anyone would prefer their savings in a banking system run by inexperienced quants, liars, blackmailers and frauds rather than in gold bars is beyond me. I have never won dealing with sociopaths and I doubt you can either. Without knowing whether the future holds inflation, deflation or just chaos, the charts clearly tell us the likelihood is gold will rise.
Like the dollar index, the gold market is speaking clearly. On 10/24 the market, after a sharp sell-off, had an outside key reversal day followed by a test the next day. An automatic rally ensued which resolved into a trading range between 10/31 and 11/11.
This was notable for the contraction of volume on two down days 11/3 and 11/7 showing supply drying up. This was followed by a 2 day spring 11/12 and 11/13. The latter being a reversal day. Support was evident 11/17-11/20 and a sign of strength followed with the high volume large range breakout 11/21. This breakout too was tested and resolved by the two day spring 12/05 and 12/08. Since then the rally has been almost 100 dollars without any serious reaction on the daily chart. We are now at resistance and have barely closed above it. This is a dangerous point, but there has been little negative in the chart so further upside can be anticipated. Again fund liquidation in gold seems to have ceased since 11/20 on the intraday chart. And we have moved up on relatively little buying. Tomorrow is the fomc meeting and interest rates will probably be even closer to zero. Why anyone would prefer their savings in a banking system run by inexperienced quants, liars, blackmailers and frauds rather than in gold bars is beyond me. I have never won dealing with sociopaths and I doubt you can either. Without knowing whether the future holds inflation, deflation or just chaos, the charts clearly tell us the likelihood is gold will rise.
Sunday, December 14, 2008
MARKETS SUNDAY 12/13/08
12/13/08
the snp completed a secondary test on
friday and thursday night. Few contracts were pressed on the market. This indicates that this stage of hedge fund liquidation in the stock futures is over and a rally can be anticipated to begin shortly. Friday was a reversal day with a close at the top.
Dollar index-- The dollar index broke through its support thursday and failed to rally friday. Distribution began 10/23. There was little demand on the rally from 10/30- 11/19 followed by a sign of weakness 11/24, 25. The next 3 or 4 days showed some support which then petered out and liquidation began monday of last week. No day exceeded the previous day's high all week.
The other currencies are in the same position more or less.
Gold-- Similar but inverse to the DX. It has not broken out yet.
The point from the above is that this stage of hedge fund liquidation has ended and with it the rally in the dollar. We shall soon see if that liquidation covered up a currency crisis and now in the midst of and because of quantitative easing foreign funding slowly disappears. The battle for middle earth continues.
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