Day After Tomorrow.

Like clockwork, we had a red day today. Nothing serious, at least not yet. It just let out some excess steam before reaching the April 10 high. We are about 25 points away from that and I expect the retest will happen by May 2, Wednesday.  While the momentum is definitely weak, there is no sign of definite sell signal yet. But it looks so similar like last year which I have marked in a rectangle.

If this pattern is to play out we might see an overshoot of the last high. It may not be a bad idea to start laying the defensive bets now onward.

When the correction comes, it will be fast and furious and will not give us much time to take advantage. But at the same time, it is risky to front run, as I keep saying. So we will have to pick up sectors where there are definite weaknesses.

Copper is having a bounce but given that the demands in China are slowing; it might be a safe play to short copper. Oil is another one, because oil sells off every summer. Emerging markets are struggling.  Financials do not look particularly strong nor do Russell 2000. We will see what day after tomorrow brings. It does not have to be all in at one go.

For tomorrow at least, I expect the market to be up if not substantially.  If on the other hand, we do not end strong green tomorrow, it will confirm that the end is close. I would like to end today’s post with a quote from the famed investor, historian and economist Peter Bernstein. ( Hat tip to Joshua Brown of reformed Broker) :

“I have opted for more conservative ideas and not aggressive ones.”

"After 28 years at this post, and 22 years before this in money management, I can sum up whatever wisdom I have accumulated this way: The trick is not to be the hottest stock-picker, the winning forecaster, or the developer of the neatest model; such victories are transient. The trick is to survive. Performing that trick requires a strong stomach for being wrong, because we are all going to be wrong more often than we expect. The future is not ours to know. But it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances. Being wrong comes with the franchise of an activity whose outcome depends on an unknown future (maybe the real trick is persuading clients of that inexorable truth). Look around at the long-term survivors at this business and think of the much larger number of colorful characters who were once in the headlines, but who have since disappeared from the scene."

I am reading the above post again and again and would request you to do as well.

Things To Look Out For Next Week.

• Election in France and Greece. May have some impact on Euro in short term. But commercials are still heavily long Euro.
• Monday there will be settlement of about $ 9 billion Operation twist. Most likely markets will be in Red.
• Expect one more push up in May 1 and 2.
• McClellan Oscillator has reached that danger zone.

Do we still want to bet on more straight up?

• Will watch carefully the test of the highs. If it fails , may be time to start building up short position.

Weekend Musing.

·         Did you notice that Apple is down two days in a row while Nasdaq has been up? It would seem that those who are holding big lots of Apple are using the strength of the general market to unload, without causing panic. Rather, BOYZ may be pumping the market to distribute. There is a method in the madness my friends.

·         Bad news is good news. US GDP is below estimate. UK in double dip recession. Spain is downgraded. US unemployment claim is high. How do we react? By pushing the stocks higher.  How quickly the sentiment changes. Only last week there were talks of end of Bull Run and deep correction. Today we are talking of SPX 1500!

·         SPX is on its way to re-test the high of April 2. My maximum upside target was/still is 1450 + or – a few points. We have already been to 1422 and back. I do not see the point of taking risk to go long for another 2% at this point.

·         We may not hit a huge bear market anytime soon, but let us not rule out the possibility of a 10%-15% correction.  The Chairman said that he will be there to catch us if we fall. Look at it other way. He can catch us only if we fall and he is standing ready to catch. If the market keep going up where is the need for cash, I mean to catch? Now that GDP count has come lower than expected, he can justify more easing without looking partisan. But for that he needs some panic. Mark my words, panic will come soon.

·         Then why am I not doing anything? Because any action now will not result in good entry.  If we shorted last week, we would have regretted already as you can see. And if we go long now, we will regret  week after. 

··         You are really interested to understand how the macroeconomic factors and world events affect the market behavior in the USA. You read all finance blogs and are convinced that the world is run by bad bankers and politicians and it will soon come to an end. You have started hording gold because you believe gold will reach $10000/oz and fiat money will come to an end. But still, for the last four years, your portfolio may not have grown along with your conviction. How do I know? Because I am one of those suckers who fell for that trap. Only now I am waking up to the reality.  Only now I am starting to understand a little as how money of today is different from money of yesterday. What are the powers and limitations of CBs. Eyes are now opening to the fact that fear mongering is a powerful business model. I am not mocking anyone. I am just one of those who have been taken to the cleaners time and again and have now decided to try it out myself. This is a process of learning and in that process; I have made some good calls and some bad calls. I am trying to learn from the mistakes and bad calls and reduce bad calls. And I think I will reach there. To make a long story short, if you want to know where the Index will go, just follow GE.

 

This is a comparison of GE vs SPX. If you can analyze how GE will perform going forward, you may be able to guess where the markets will go. 

That’s all for this weekend folks.  Enjoy this wonderful weekend and forward this post to someone you know who might benefit and invite them to read more at http://bbfinance.blogspot.ca/

There Is Bull and Then There is Bulls**t. Edited.

It is not the market action that is surprising. It is the reaction of various pundits who dish out various sermons that is surprising. Was it surprising that SPX closed around 1400? I would have been surprised if it did not. But so many have written the obituary of the up-trend and have gone short and are now surprised that the market is going to test the highs again. 

So, the market has killed some of the early bears and it is now laying trap for the early bulls. Or for those who missed the last rally.  Among all the noise, what caught my eye today was an article, stating that Gold will reach $10000/oz! Now that is something! I was so intrigued that I did dig a bit more. This article was written by an entity that is operating out of Ireland and fishing in North America for gullible investors. They proclaim to be dealers in precious metals and offer wealth management services. Obviously they are trying to manage their own wealth not yours.

I am gold bull myself and expect the price to reach $ 2500 in the next 12-18 months but $ 10000/oz? What are they drinking?  Does it remind you of Tulip mania? But a scam star will do its best to scam and we give it to them.

Educate and inform one more person around you and let this chain start working. Only through collective knowledge about the functioning of the market, we can become better investors.

Nobody can be right in calling the market all the time. The best investment policy is to follow the dominant trend and not get whipsaw or front run. Give up some of the profits in the beginning of the trend just to make sure that it is not a head fake. I understand that the most difficult part is to wait but with proper money management, risk management and trend identification we can be successful in the long run. Good trading opportunities come only 2/3 times in a year.

Thanks for bearing with my rant. We will wait and see how the market behaves for next few days and decide our course of action. A test of the high is always in the cards but we need to see what happens thereafter. Do not chase the bus. I would humbly suggest that you do not even dream of going long here or short. Just stay put in cash. In the mean time, start the process of educating one more person. Forward this post to someone you know who might benefit and invite them to read more at http://bbfinance.blogspot.ca/

Note: This post has been edited after one reader very correctly pointed out that I should not mock anyone else.It is OK to point out scams but it is not OK to criticise others who are also doing a great job of educating retail investors / traders. I myself have been wrong in my market calls in the past and I should realize that nobody can be right all the time. My apologies and thank you for pointing out my mistakes.
I stand corrected and humbled. 

Any Value In Free Advice?

We do not normally value what we get free. But I think my free advice “Do not short” has more value than many paid subscription services. At least I was able to save some from harm’s way and protect capital.

It now looks more likely that we will re-test the high of April 2. It may not happen tomorrow but we have few more days to go there. We will evaluate the momentum and strength of the test in the next few days and decide whether to short, depending on whether such a retest fails or makes new high.  I do not think it will make a new high now.

The Pavlovian dogs started salivating the moment Bernanke mentioned that he is ready for more accommodation. What he did not say when he will start new QE. But with the super duper result of Apple and hint of more free money, the market has sprinted out of the gate. I think it can go up for few more days. NYMO has now crossed in positive territory and not yet overbought.

The market is keeping both sides interested and in the process killing both the bulls and bears. It is amazing to see how quickly the sentiment changes. Now we will have new believers who think that the correction is over and will bring in their money to get long. Beginning of a new month is around the corner and those who were lucky enough to sell around the top, will now think of going long again. Those who missed the boat last time, will jump in early, only to be fooled by the market again.

But if we stop to think, nothing really has changed from last week or the week before or even the months before. We are muddling through till we cannot. Only thing that is keeping the circus going is the unlimited CB liquidity. Some of you may not agree but that is a fact. Also the fact is, it is an election year and we are coming close to a long term cycle and this script has already been played before.

Do you remember this chart I had shown before?

This is SPX translated in Euro, matched against Nikkei. The picture gives the general direction and do not indicate absolute levels of highs or lows. Everything that I follow tells me that this is the path we will take. So expect a new high this year before they tell the last man out to switch off the light.

That’s all the free advice for today. Thank you for reading http://bbfinance.blogspot.ca/ . Please forward it to your friends and invite them to join me in twitter.  (@BBFinanceblog).

Last Bounce Coming?

I don’t want to sound vain but I did write last Sunday that both Apple and the market in general are due for rebound.  “I think from TA point of view Apple and the market in general is due for a bounce but such a rally should be sold.”

Yesterday I said: “What I find interesting is that we can consider it as test of previous lows which it did not break.  Now it should have a test of the previous highs, at least which is the theory. Only when that test fails and it reverses, we can short with confidence.

And there we have it all.

Apple blew away the street prediction with almost doubling its profit and the shares of Apple are up $ 40 in after market.  SPY is up over 0.5 %. Of course we will have to wait for the market to open tomorrow and much can change overnight. But taking everything into consideration, it is highly likely that we will have a re-test of the April 2 high before we roll over.  And this is precisely the reason I am not short yet. Hope you all are in cash and cushy!

DOW closed above the psychological 13000 mark and SPX gained almost half of yesterday’s loss. So there is not much downside momentum yet. They are keeping both the bulls and bears interested in the game.

It is tiring to repeat same thing every day and you may also be feeling bored reading the same stuff. But the objective is not to lose money and not to write something sensational like global conspiracy etc or scare the hell out of readers. We want to cut the noise and follow the confirmed trend. No fancy charts, no analog, no Elliot wave analysis, no macroeconomic bull s**t.

The bottom line is: stay on the sideline and stay in cash.

Thank you for reading http://bbfinance.blogspot.ca/ . Please forward it to your friends and invite them to join me in twitter.  (@BBFinanceblog).

Range Bound.

Yesterday’s post on Apple was picked up by www.Forexpros.com  http://www.forexpros.com/analysis/apple-and-gold:-more-in-common-than-you'd-think-120953

Apple sold off in the morning but bounced back later, to close with a tiny red. The interesting story of the day is that of SPX. At some point in the morning, SPX was down almost 1.5% but it pared back the loss.

What I find interesting is that we can consider it as test of previous lows which it did not break.  Now it should have a test of the previous highs, at least which is the theory. Only when that test fails and it reverses, we can short with confidence.

Tim Knights of SOH has this chart of /ES. ( SPX futures)

As you can see, /ES is moving in a range and today it touched the lower part of the range and bounced back.

Let us see what Apple and Bernanke bring the day after.

They say, sell in May and go away. But no where it is said that sell on 1^st of May. Actually, 1^st of May is bullish for stocks, DOW up 11 of the last 14.

I am still waiting on the side for confirmation of break of this range and failure of the test of the highs. As of now, the markets either gap up or gap down and mostly stay there for the rest of day. Not a good sign for retail.

Thank you for reading http://bbfinance.blogspot.ca/ . Please forward it to your friends and invite them to join me in twitter.  (@BBFinanceblog).

Apple

I find lots of similarities between price pattern of Apple and Gold. Take a look at the weekly price of GLD.

And now at the weekly price of Apple.

Same parabolic move. Similar euphoria. The law of mean reversion applies to everything which shows parabolic move.  In both cases, prices moved within a well defined trend line for a long time. When prices touched the upper trend line, there were corrections which were healthy and subsequently the uptrend resumed.  But then greed and irrational exuberance took over.

Gold has reverted to the bottom of the trend line. I remember last year ZH and various other gold bugs were talking of gold $ 5000. And this year there were talks of Apple $ 1000. If the mean reversion of Apple takes place, we are likely to see $ 500 or below before we see $ 1000 for Apple.

Apple quarterly reporting is at the front and centre of things next week. Anything less than block buster is going to blow up.  And the cycle of Apple is down till June. It does not mean Apple is doomed. It is an excellent company and price may indeed reach higher. But such burst to the high will come around the release of Iphone5 which is due sometimes in October. So a good correction will be a buying opportunity.

SPX is holding the support level at 1375. 20 DMA has not yet crossed down the 50DMA but that cross over is close. The market may try again to test the high of 1422 but there are signs of exhaustion.  A spectacular earning report of Apple might give that last boost. But on the other hand The Fed meeting and announcement is due this week and like last month, I do not think they will announce any QE3 this time either. So we are setting up the stage for some volatility.

I think from TA point of view Apple and the market in general is due for a bounce but such a rally should be sold.

Right now patience is the key.

Thank you for reading http://bbfinance.blogspot.ca/ . Please forward it to your friends and invite them to join me in twitter. ( @BBFinanceblog).

Longer Term View.

I would like to share one chart from Stock Trader’s Almanac which they have put out in their free report.

This chart makes the distinction of a Presidential Year cycle. Because all incumbent Presidents try to pump the market and the current one is no exception.  They all need money from Wall St and TBTF Banks for their campaign.

This chart became available only yesterday. But I have been writing the same thing for past so many days and months.

The only thing that is important to the market; How much money is out there and where that money wants to go.  To all the Uber economorons  out there who are predicting imminent doom of fiat money, sorry guys, I have some bad news for you. You will have to wait.

Did you read the latest efforts of global re-flation? IMF has just increased its war chest by $ 440 billions and most of the money is coming from the developing countries. http://www.reuters.com/article/2012/04/21/us-imf-idUSBRE83I19X20120421

This is specially aimed for Spain and Italy. Why do you think the central banks will stop here? What prevents them to write another cheque to themselves again. Isn’t that they are doing for so many months?

There is a time for everything, even for serious corrections. If you look at the monthly chart of SPX

We are in a range for over 15 years now and are about to complete the upper side of the range before any serious correction can happen.  Let ZH scream and shout about Spain and break up of Euro, nothing much is going to happen till the end of 2012. For now it’s all noise and fear mongering is a very good business model.

However, that does not mean I am suggesting that we should go long now. On the contrary, I think we have a short term opportunity for a fishing expedition when a short and violent correction takes place. I expect that correction, between 5-10% should start by next week, after Apple results. I plan to write a short note on Apple tomorrow. I think end of such correction will be a buying opportunity, not now. For now, we can either sit on cash or try the short side, but do not expect any major correction.

I wish you a very enjoyable weekend. Thank you for reading http://bbfinance.blogspot.ca/ . Please forward it to your friends and invite them to join me in twitter. ( @BBFinanceblog).

Typical Topping Process

This is a typical topping process we are witnessing.  Most of the indicators have turned south and tomorrow is the last day for cycle top.  It does not mean that we will have huge sell-off from tomorrow. Actually we might see a green day tomorrow being Op-Ex.  As they say, topping is a process.

Gone are the days when the index will go up on the one way street no matter what. But I still do not have any target for downside. Will it be similar to 2011?

Given the fact that it is a Presidential election year when the incumbent grease the market to stay in power and huge liquidity around, I do not think a huge sell off like 2011 is in cards.

I am still waiting on the sideline without being short. One of the simple sell signal occurs when fast moving averages like 20 DMA crosses under slow moving averages, say 50 DMA. Right now they are coming close have no crossover has occurred yet.

Gold seems to be coming to a bottom but I would still wait for sell-off in equities to see how all the risk assets behave together. Here is a long term weekly chart of GLD.

As you can see, the price of gold is just touching the trend line. Even with the correction it has not broken the trend line yet. Gold may well cross $ 2500 in the next 12 months before the bull market in Gold ends.

Hope you all are in cash and cushy.  Thank you for sharing my thoughts and reading http://bbfinance.blogspot.ca/

If Things Are So Bad In Europe, Why Euro is Still Above Parity?

Things are not so good across the pond. ECB is unable to make the PIIGS pretty even with 1 Trillion Euro lipstick. (LTRO).  Spain bailout is not a matter of if but when. Italy has just announced that their target for reaching budget target will be postponed by one more year. Given all that bad news, why is Euro still above parity? Why the commercials are long Euro week after week for last so many months as you can see in the COT report. What do they know that we are missing?

ZH and all the proponents of doom and gloom are predicting the imminent end of the world and urging us to load up on gold, gun and canned food. But Gold is refusing to go up, Campbell shares are down in the dumps and only gun sales are up. What gives?

I think the answer can be found in the following graph.

It shows the liquidity pumped in by all the central banks around the world.  And Obama will do anything to get re-elected. If he can make a side deal with the Russians regarding missile defense, do you think he would feel shy of pumping the market?

One might ask, if so much money is being pumped in the system, why we do not see much of inflation, leave alone hyper inflation? There are two reasons. First, inflation is rampant in BRIC countries. It is officially around 10% in India and 9% in China. Actually it is much more. Secondly, In developed countries like USA, it is hidden from direct public eye. If you are doing your groceries, you definitely feel the pinch and see either prices of milk,bread and other essentials are going up every year or package sizes are reduced by the companies who charge the same price as before. It is just because the way they calculate CPI in USA that they are able to show inflation below 2%.

But most importantly, there is a huge erosion of asset values which is kind of deflationary. So basically what we have in USA is stagflation. How does that affect the stock prices? In the long run, not the way Bernanke wants them. But that is another story.

I have been writing not to short the market yet, although the upward momentum is almost over. Because we might go in sideways for some time before any correction and even then the correction may not be very deep.

That’s it for today. Trade safe and do not front run. Remember we do not always have to be in the market.

Thank you for reading http://bbfinance.blogspot.ca/.

Top Is Near.

I apologies for my long absence. It has been extremely busy at work with extended hours. It never seems to finish. This is more so as we are shifting the entire client portfolio to a defensive position.

Anyway, nothing much has changed since last Thursday. One big up day followed by a big down day followed by a still bigger up day. The trends following models are giving whipsaw after whipsaw. If you remember my last post, I said, it is time to sell in to strength and remain in cash. It is not yet time to short. And I still stand by that comment.

Just a look at the daily chart of SPX should convince you that we are in a topping process.

It seems that the DMI is about to have a cross over. I keep writing that we will re-test the high and only when we fail, we can be sure of trend reversal.  McClellan Oscillator is still negative, even after the huge gain today.

It still has some more room to run which might take SPX near the earlier high.

As per my cycle analysis, the top is around April Op-Ex. It is not an exact science and it may move around a day here and there but I would not be in any long position after Friday, April 20^th.  It is either SPX 1450 or April 20^th, whichever comes 1^st. The earning season has been good so far and that it’s keeping the hope alive but hope is not a good trading strategy. So we might see a last minute surge before the curtain falls.

How far we will fall in correction is not yet sure. But most likely, May will not be very kind to the bulls. It is important to remember the time frames. In a longer time frame, we are in an uptrend but in a shorter time frame, we will see corrections. That correction will be a buying opportunity but we need to know when the correction is over when it is time to buy again. As of now, it is time to sit on the sideline.

Thank you for all your kind emails and comments. I will try my best to be regular.

On The Way To Re-Test The Highs?

Today was an example as why not to front run. It also validates my reason not to short the market even when the trend model gave sell signal and stayed neutral. I had many factors to consider like few technical parameters, trend model, cycle analysis and money flow. And they did not line up together. In the end, I decided to believe the cycles which tops next week.

The earning season has started. Alcoa started with a better than expected result and today Google came out with a better result as well and is up after market. I think the euphoria will be back tomorrow and next week and all talks of gloom and doom will be forgotten. That is how they set up the market.  Again, it is not the time to go long nor it is the right moment to short. Only good thing to do is to sell in the strength. We might see SPX reach 1450 next week if the euphoria continues but risks are high. And I am writing this over and over, unless we see a re-test of the high and its failure, we are not sure of trend reversal.

When the market sold off 5%, I got some hate mails, ridiculing my call of SPX 1450 and market top call by April Op-Ex. My favourite  south Asian (I think he is an Indian settled in US) troll even told me to stop writing. I fail to understand why the troll reads my blog and spend so much emotional energy to hate someone whom he has never met. Internet gives us anonymity and the chance to show our true character. May be the guy grew up in a hateful environment and had a difficult childhood. May be he saw his father abusing his mother. Who knows. But that guy is truly damaged.  The bottom line is, chances are we will still see a new high before the market rolls over. I still do not rule that out.

Today AUD gave a new buy signal and US $ broke through important Fibonacci support level. Michael Boutros has this nice chart: (Ticker: USDOLLAR)

Even the RSI broke through the rising trend line.

The Speculative Sentiment Index shows that the retail trade is long USD and short EURO and AUD.

SSI is a contrarian indicator and it signals more gains for Euro and AUD, at least in the short term. If that were to happen it will definitely benefit the risk assets including equity.

Tonight we will have Chinese GDP data release and I am sure it will add to some volatility tomorrow.

Gold is at a very interesting cross road. It is near the end of the cycle bottom, but we have not seen any capitulation of the investor sentiment yet. Today the Gold is up because US$ was down big time. But by end of April or early May, we are likely to see further strength of US Dollar. How PM sector behaves during the period of Dollar strength is to be seen. All in all, I am still waiting to see a good bottom for Gold and would rather give up some initial gains.

After a long 3 month up-trending market, we are coming to a period when we will see sideways and choppy movement in the market. I would not like to participate in such markets and will wait for clear and definite trend, whether up or down.  We do not always have to be active in the market.

Thank you for reading http://bbfinance.blogspot.ca/. As usual, I always look for your comments and mails. 

Cat Bouncing?

From 1422 we came down to 1358 in 5 days. That is about 5% correction which I was hoping for end of March. But even with this small correction we are in oversold territory. How can we hope for a good shake down when we have tripped just out of the gate? That is the reason I am not going short yet. I would like to see a complete trend change lined up with all other parameters, which we do not have. And I am not getting a price target for correction either.

The longer term cycle tops next week which is also Op-Ex week. The week of Op-Ex is generally a bullish week. As per Stock Trader’s Almanac,  on the 1^st trading day of the expiration week, DOW is up 15 of the last 22 and on income tax deadline day, DOW has been down only 5 times since 1981. Past is of course no guarantee of the future, but given the fact that we are in oversold region, and indexes generally try to re-test their earlier top before rolling over, it seems likely that the markets will give another try.

By no means am I suggesting going long or shorting. I would rather be on the sideline now, if you had some nice profit so far. Because cash is also a position. May be we can take a short position in the 4^th week of April but let us 1^st see through the next 4/ 5 trading days and let us see how it goes. One definite indicator of market weakness would be if the indexes fail to make new high. Let’s look at SPX weekly chart.

Almost similar like last year around same time.

Because of the other work commitments, I will have to change my trading style. Going forward, I would be looking to trade as little as possible. Just identify bigger trends and go with that. Other times stay out of the market.

I think for the year 2012, bears will be disappointed. This will be the year when indexes will reach the previous highs and most likely exceed it before going downhill in 2013, 2014. When that move starts and from where it starts, is something I will be watching and waiting for.

SPX monthly Chart.

Thank you for reading http://bbfinance.blogspot.ca/

Sell Signal Generated.

Today we had confirmation of the trend reversal in the trend following model. But McClellan Oscillator is severely oversold.

 So I am not sure if I should go short now.
 From the TA point of view, it is quite possible that we will have a bounce and re-test of the previous high and only when such a re-test fails, we can be sure of longer term bear market.
I would like to draw attention to the last Friday's report where I had shown cases of re-test of earlier high.
Otherwise it will be a flash in the pan. Once we are confirmed of a bear market, we can expect it to continue for a while and not suffer whipsaws.
I would be busy with additional work in the office and that may lead to delays in writing the blog.
Thank you for sharing my thoughts.

What's Next?

While it is always possible that we continue to go down from here, rarely the bear market starts on bad news. On the contrary, the top is always reached on euphoria. Let’s factor that into consideration.

Everyone is expecting a pull back now. Isn’t it wonderful to watch how quickly the sentiments turn sour? No longer we hear talks of SPX going upto 1550. Now it is SPX going to 1250. And if making money in stock market was that easy, we will all be rich and retired.

My cycles continue to point to the top around April Op-Ex.  And I continue to get the fall off the cliff timing around May. That does not mean we will continue to go up. More likely, we will chop around 1375-1450 level for a while.  Between now and April Op-Ex, there is still a possibility that we will go up.

Today’s gap down was expected. But the market recovered quite a bit barring the last hour sell-off.  Today was the 4^th consecutive red day and VIX closed outside the upper BB 3^rd standard deviation. If past patterns are any guide, we may have topped here in VIX short term.

And McClellan Oscillator is quite negative as well.

So further severe sell-off from this point is little difficult.

On the weekend report, I had mentioned the chart when SPX is down 4 days in a row. And almost in all cases it has been followed by a short term bounce.

However, this time is not quite like January or February. The weakness in the market is evident. The top is close by. The sell signal is almost there. But there is no confirmed sell signal yet. It is said that once bitten, twice shy. So I am waiting for confirmed trend change. Now may not be the time to be cute.

Thank you for reading http://bbfinance.blogspot.com/ . I look forward to hear your views and comments.

Critical Time Ahead.

The futures are down big time. With the markets showing weakness already, is this the infliction point we have been waiting for all these days? I somehow think this is not yet the time even when the market goes down on coming Monday.  The following is SPX weekly chart.

On the chart we see that this rise from January is not the longest one. The one immediately before was during the QE2 as on the right side of the chart. The index broke the trend line, then went back to re-test the highs few more times, before rolling over.

Why it should be any different this time?

It is certain that the market will drop on Monday. It is a question of how much. The drop on Monday will be the 4^th consecutive red day. I will borrow a chart from Cobra which shows that it will be a good buying opportunity, short term.

It has been a strong up trending market for over three months now and I doubt if it will turn on a dime. I do not want to jump the gun and start shorting it, just to get another head fake. I would rather follow a confirmed trend. End of the day, Monday will give us more clear picture about the immediate future.

Till then, enjoy the long weekend. Thank you for reading http://bbfinance.blogspot.ca/ . Please forward it to your friends and join me in Twitter for live market commentary. (@BBFinanceblog). 

Have We Turned?

After many days we got a 1% sell off. It reminded people that stock can go down as well. However and a big however, I did not get the sell signal yet. It is getting pretty pretty close and all the signs of a topping process are there. But we have calling that top many times before and this time I want to be 100% sure. More the reason that we will get the parabolic finish to mark the end.

Pandits are saying that the stock market sold off because it is disappointed with no QE3. People in the know do not for a moment think that a QE3 is coming now. Already operation twist is going on. The Fed is already pumping in money in the system. Why do you think we went up from 1080 to 1400 in the 1^st place?

Let me quote from Lee Adler of Wall Street Examiner:

In today's conomic news, the mainstream media focused on the disappointment surrounding the FOMC Minutes, the massaged and sanitized fairy tale about what the participants said at last month's FOMC confab. The market was shocked! SHOCKED! that most of the members saw no need for additional QE, unless things got worse. I had concluded that a couple of months ago based on the fact that every time QE speculation arose, not only did stocks rally, but so did energy and other commodity prices. The commodity vigilantes, I thought, would tie the Fed's hands. That and the fact that the conomic data was coming in relatively perky, at least in terms of the headline data, made it highly unlikely that the Fed would do any more money printing.

But here's the thing. The minutes are fake. They are fabricated, false, phony, ginned up and sterilized garbage, designed for public consumption. To put it bluntly, they're propaganda. They are what the Fed and the Wall Street casino owners want you to think. They are a blatant attempt to manipulate the behavior of market participants through the use of clever turns of phrase. The Fed wants the market to go higher, but it doesn't want commodities to go with it, so its story line is that the conomy is healthy enough to continue growing without more QE. That gives traders reason to continue buying stocks, and no reason to buy commodities, which everyone "knows" go up when the Fed prints, in spite of Bernanke's denials that he's doing that. And besides, even if he was, commodities are up for other reasons, not anything Ben did, according to Ben.

That's what these "minutes" are about, self justification and market manipulation. We won't know the real story until February 2018 when the Fed will release the transcripts of this year's FOMC meetings. Why do they hold them back for at least 5 years? Because the Fed thinks that you can't handle the truth. The problem is that you can and they just don't want you to know what it is, because if you did, you'd be able to make informed investment decisions. The decisions the Fed wants you to make are to buy stocks, buy and hold Treasuries, and sell commodities. They tailored the minutes accordingly, so that the headlines would elicit the desired response. They think that they're Pavlov, and we're the dogs.

And I fully agree with Lee. The immediate result has been drop in commodity prices. Oil is down to $ 100, gold and silver is down. And stocks will continue to climb soon. May be as soon as from tomorrow and we will definitely see a new high before we roll over. I am sure we will see 1440 soon before bear attacks. Today we had a confirmed double bottom and a confirmed breakout.

We will see what tomorrow brings. The trend is still up until broken. Thank you for reading my blog. Please visit http://bbfinance.blogspot.ca/  and follow me on Twitter (@BBFinanceblog). You can post your comments in the blog or email me directly at bbfinanceblog@gmail.com. I look forward to hearing your thoughts.

Distribution Or Blow-Off?

It did not take much to get you excited, isn’t it? All the noise for less than 0.5 % drop? Don’t forget we have to keep the bears interested in the game as well. Just take a look at the daily candles. Today was an inside one.

The FOMC minute sparked a sell-off which puts in doubt the theory of blow off rally. But did anyone really expect the Fed to promise more free money at this stage? Not the big boyz at least. They know it is coming and they would have to be patient.

There are still big money waiting in the sideline and I think the trend change is not yet due. Well, I may be wrong but I will change my view only when I see /ES closing below 1390. Till that time it is a bear trap. As of now /ES bounced off 1400 and hourly RSI is oversold.  The following is another daily chart of SPX.

The Ichimoku is on buy signal, there is no DMI cross over, there is no trend change in Arron and no obvious divergence in RSI either.

Therefore, I still maintain my call for top in SPX around 1455 and by the OpEx of April. The internals are getting weak and we will get our 15% correction but not yet. I have shorted too early in the past and I am not going to do the same mistake twice. As of now the up-trend is still intact. Only thing that changed from the weekend plan is how we get to 1455. When I wrote the plan, I thought we will have the spike up in 1^st week, roll down in 2^nd week and re-test the high and fail in the 3^rd week. Now it seems we will grind up slowly all the way to Op-Ex.

If you will, let us repeat, we will not trade out of greed or fear. If you take a note, treasuries also sold off big time today and that does not really indicate bear attack on stocks. Anyone who cares to listen, now is not the time to short unless you are a day trader or scalper and know what you are doing.

That’s it for an exciting afternoon.  Thank you for reading my blog. Please visit http://bbfinance.blogspot.ca/  and follow me on Twitter (@BBFinanceblog). You can post your comments in the blog or email me directly at bbfinanceblog@gmail.com. I look forward to hearing your thoughts.

"Blow-Off Top" Rally, Day 1

It was a rather sedate start of the “Blow-Off Top” rally. In the morning, before open /ES gave back all the overnight gain and was in negative.  SPX even started in negative territory. But the cycles have bottomed last week and whatever be the news, the market zoomed up. I do really wonder, is it really the news which moves the market?  Because we did call for the start of the rally from Monday, i.e today and the plan of action was laid out in the weekend report.

If we take an average target of 1455 and I will come back to that figure in a while, we are now only 35 points away and we have 3 days to reach there. I think it is immensely doable. And why 1455 you may ask. Because everyone is still shorting it as we go up and a big short is set at 1440 and then 1450. The market will take out all these shorts.

What to expect for tomorrow? The last hour sell off ensured that we get an up day tomorrow because it removed all the short term over bought conditions, paving the way for another up-move. I think we will see this pattern being played out for all the next three days, where we zoom up during the day and release some pressure before close.  Remember, this is a “Blow-Off Top” Rally!

Today the old trusty FX proxy for SPX came back in play. AUD almost mirrored SPX as you can see from the following chart.

I was trying to figure out how AUD is going to play out in short term and I got this beautiful chart from Michael Boutros:

As you can see AUD is bouncing from the 50% level and a rising RSI trend-line. A close above 1.05 will be huge positive in short term.

Of course there is a curve ball in the evening because RBA rate decision is due tonight but I don’t think they will reduce the rate. If they keep the rate at the present level, that will be positive for AUD and “Risk On” trade.

This is a short week and seasonality as well as cycle indicates a very strong week. I think DOW will top around 13450-13500 and SPX around 1450-1460 this week. Again, it is just 35 more points in SPX and there is no reason to think that it will not be reached. Still too many talking heads are calling for immediate decline and they will be soooo disappointed. I think they will have to wait till May for any meaningful decline. And then they will jump up and down as if they have discovered gravity! As I said in morning, none of these folks know anything any better than any of us and these are all empty sound bites.  We are all shooting in the dark. Sometime it works, some it does not. I am trying to figure out how to improve on the success rate. Getting there, slowly.

Thank you for reading my blog. Please pass it to someone who might benefit from it. Visit http://bbfinance.blogspot.ca/  and follow me on Twitter (@BBFinanceblog). You can post your comments in the blog or email me directly at bbfinanceblog@gmail.com. I look forward to hearing your thoughts.

Some Contrarion Thinking.

I was thinking that there are no bears left in town. It seems that I may be wrong. Everyone worth his name is now giving interview in Bloomberg that stocks are due for a pull back. For e.g.

Or take this.


Or take that.


I think stocks will go higher from here.

All these talking heads are just shooting in the dark and they do not know any better than you or me. Only difference is that we don't get a chance to wear a nice suit in front of the camera.

For those of you who like charts and believe in TA, here is nice chart from Ilya Spivak, Currency Strategist:

The Trayvon Martin Case.

I am neither white nor black. So should I keep out of this? It is such a sensitive issue. I might be called names if I venture into this minefield. Might be blown apart. But after seeing the exchange of words between Piers Morgan and Toure’ in CNN, I cannot help but feel sorry for the state of affairs in American journalism.

The case is tragic. One unarmed person was killed in cold blood. For whatever is the reason, the local police did not arrest the killer. This is not acceptable in a civil society and justice must be done.  But due process of law has to be followed. If racial hatred played a part in killing that must be investigated and guilty must be punished. What the colour of the skin has got anything to do with justice?  

But does it mean all whites are guilty by association? Why the black journalists are trying to portray the whole black community as victims? Hasn’t Americans  risen above colour politics and have elected a black person as President? It will never happen in France. It will never happen in England or Italy or Switzerland. It is possible only in America that American have risen above colour and elected someone as their President, who is black and has a middle name which is non-Christian. Then why paint all the whites as racist? Why are you blaming others for everything that is wrong with you?

Punish Zimmerman, by all means, when he is proven guilty. But even a killer is allowed to defend himself before law. Do you want to punish him by mob trial? If that is so, have persons of colour never killed an innocent white man/woman before?  Are we still living in the pre-WWII era where you can punish a whole race because they are Japanese? What nonsense.

I would call Toure’ and all black journalists to show maturity. It is you folks who are tearing apart the social fabric of America. It is you guys who are guiltier than Zimmerman, because some dumb-head will get really worked up listening to your tirade and start killing innocent people somewhere else.  You do not want to start another civil war.