5 CHARTS THAT WILL MAKE YOU GIVE THE MIDDLE FINGER TO YOUR THERAPIST
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SOMETIMES ITS FUN TO DO IT SIDEWAYS
I commented on Twitter earlier today how an increasing number of market commentators who were expressing concern about the rally at 1050 on the S&P 500 have now embraced the bullish move with a full frontal hug. The market closed only 4 points higher than the intra-day high on Wednesday, but the change in sentiment as a result of that 4 point increase is terribly disproportionate. Traders and investors have gone into this weekend feeling more bullish than they have in months. It may be for good reason, as the type of explosive move we have seen since October 4th typically results in a bottom that is sustainable for a period of months. That does not, however, mean that we won't get pullbacks along the way. We continue to be at one of those points where upside will be difficult to come by for the next 1-2 weeks. I would be surprised if we see too much weakness. I would also be surprised with further strength. In fact, further strength will result in "super move" that will hurt the bullish case. A break above 1240 on the S&P 500 next week has the potential to result in a move to 1300. While this will be stimulating for bulls in the short-term. Long-term it will make for an unstable trading environment moving into November and December. That leaves us with the sideways range I discussed mid-week. 1190-1230 is what I mentioned at the time. We moved down to 1190 on Thursday and closed on the high end of the range (1224) on Friday. Expect more back and forth. Bottomline: The bullish bias of the markets should continue well into November. The remainder of this month, however, may be more sideways than anything...
THE FIRST DAY OF CONSOLIDATION
Today the market stayed right in line with the range I outlined last night with a low of 1190 and a close at 1203. One of the most bullish scenarios for the bulls will be a week long consolidation right below the 1220 level. This would set up a scenario where a legitimate test of this important level takes place during the final week of the month. The strength in technology continues to be very impressive and tells of good things ahead for the market. However, the financials will act as weight (again, this plays into the sideways thesis being correct into late next week) while their earnings are released into late next week. They should counteract one another well enough to keep us range bound until the earnings news comes to an end and fund managers can focus on how they cannot allow themselves to miss out on performance going into the end of the year. The affinity for risk should increase steadily throughout November. I am happy being in a 70% cash position. I have 30% invested in ZSL (short silver). This is a position I initiated in the pre-market this morning. I can't see myself taking on much more than this until late next week. I will begin looking at the long-side of the equity market again then. Short but sweet. That's all for...
TRADE UPDATE – ZSL
I've established an initial position short silver via ZSL at 13.77-13.80. I have been bearish on precious metals since mid-August. I believe that both gold and silver are headed much lower as they have no catalysts going forward. The same bearish opinions that I expressed in August apply now. We have experienced a very weak bounce over the past couple of weeks. A good opportunity to reestablish a short position in precious metals after covering my gold short a couple weeks...
PORTFOLIO UPDATE
100% cash. JJC was the last of the positions to go in the afternoon. I am considering either reestablishing my gold short via DZZ after taking profits a couple weeks back. Or possibly initiating a short position in silver via ZSL. I will begin looking at exposure to equities again late next...
5 REASONS I MOVED TO A 100% CASH POSITION TODAY
The reasons I've moved to cash are as follows: 1. We are about to hit a substantial news cycle involving an avalanche of earnings. Earnings will be good. Guidance, however, will be cautious at best and pessimistic at worst. I outlined the fact that corporate executives are scared - just like everyone else - last night. This will be a sideways catalyst at best and a negative catalyst at worst. 2. For the first time today I have seen bloggers and market commentators giving credence to the fact that last Tuesday may have been the lows for the remainder of the year. I continue to believe that they are the lows. The realization of this by the trading and investing population is a marked change in psyche and signifies that bearish perceptions are changing. It also, more than likely, points to a short-term high within 20 points of today's close on the S&P 500. 3. S&P 1220 is like the black plague for stock market participants. It lasts for generations and keeps coming back to haunt those who thought they wouldn't have to experience it again. The parabolic nature of the move straight to 1220, followed by the manner in which we bounced right off of that level late today, signifies that the market is aware of the importance of this level. The 1220 level marks the point where the markets become choppy. This lends credibility to a sideways at best scenario over the next 5-7 trading days. 4. The shorts have been rinsed from the picture. This allows the market to flow more evenly from this point forward. Without the buying pressure from short sellers, the market will rely on "real buyers" for future advances. They will come, but more than likely once earnings season is coming to a close. Again points to a 5-7 trading day period of sideways action at best, with the possibility of a move down to 1150. 5. Any upside taking the S&P above 1230 will be so far outside the normal range of expectations based on past models that it cannot be taken seriously in current market analysis. Bottomline: The best case scenario for the markets over the next 5-7 trading days is a sideways trading range that consolidates between 1190 and 1230. The worst case scenario for the markets over the next 5-7 trading days is a move down to...
TRADE UPDATE: TAKING PROFITS
Took a roughly 40% profit on EDC Took a roughly 15% profit on FCX EDC position taken last Tuesday. FCX position taken on September 29th. Keeping JJC (copper) for the intermediate term. 80%...
CORPORATE EXECUTIVES ARE SCURRRRRED
Just as the entire world is pessimistic about the future of the entire world, CEOs, CFOs and everybody in between that are allowed to make decisions at your local Fortune 500 company are also pessimistic. Company executives are going to have ZERO incentive to come across as pompous mavericks proclaiming that they are immune from the perceived problems of the world. There will be a fairly consistent cautious and probably pessimistic tone in a majority of the conference calls that are to come. Therefore it would be wise to expect corporate execs to be very conservative in their guidance for the coming quarters. It sets the markets up for upside surprises, which I think will start being factored into stock prices in the weeks following the earnings parade that is to come. I don't think the conservative stance of corporate America will end up derailing the markets. I just think it will throw the markets into uncertainty/sideways mode. That is until the picture becomes clear that the economic worries are perhaps overstated and estimates based on the somber attitude of corporate execs are too low. The lows we experienced last Tuesday have a strong possibility of being the lows for the remainder of the year. That doesn't mean you won't get a better opportunity to buy them in the coming weeks somewhere between S&P 1180 and 1140. A depressed tone and cautious outlook certainly won't be sending the S&P through 1250. We'll have to wait to clear out earnings and get into November for that. All the more reason I will taking off a good bit of my long exposure tomorrow morning. Bottomline: The only catalysts to come are sideways catalysts at best. Upside catalysts in Q3 earnings report will be derailed by conservative, fearful guidance from corporate execs for future quarters. A choppy 1-2 weeks...
AN IMPORTANT RISK ASSESSMENT WEDNESDAY AHEAD
I developed the concept of risk assessment Wednesday to keep me from myself. When I say "keep me from myself", I mean all of the negative traits that I possess as a trader and investor. I have a tendency to become emotional, greedy and over-confident in my analysis at times. Risk assessment Wednesday keeps me an arms distance away from my faults. It is also a personal challenge of sorts. I am forced to step away from my analysis and look at the portfolio objectively from a risk/reward standpoint. As you can imagine and have probably experienced, putting your emotions and opinions aside in favor of objective analysis is easier said than done. You must separate yourself from yourself is the best way to put it. From a risk assessment standpoint the portfolio in its current form is vulnerable. The upside from this point over the next couple of weeks will be dependent on scenarios that fall outside the normal distribution of events for comparable periods. Meaning that we are most likely in for a period of sideways movement that lasts 1-2 weeks. We shouldn't get too much weakness. However, the chances for weakness are greater than any upside move that takes us to say 1250 on the S&P by next Friday. I'll be taking a good deal of profits off the table in the morning. EDC is up close to 40% since my purchase last Tuesday. Both FCX and JJC are up close to 10%. At worst, I think I will be able to reenter these positions around the current price point in the coming weeks. I also have a new trade that I may initiate in the morning. I will update on the website and Twitter if I...
