TRIN Divergence on Indexes...

Next High looks like a good place for the market o make up its mind...

Russell 2000 is lagging and has not been able to take out its highs.

Triangles setting up on the shorter timed frame chart for a high restest...Up/Down volume on Russell showing cracks.

If this plays out...will post if it does...so stay tuned.

Transportations - Big Backtest

Market Observations - Tomorrow...

Well, my scenario is still looking for downside resolution...just as everyone is now really looking up. But it has to happen by tomorrow and in dramatic fashion. Targets for Oil as per my previous Oil posts were around 78 to 79. Gold 1085. Dollar 74.5 to 75. I think we may be able to hit or near those targets on a gap type move. Of course, just to screw around with all the wave counting. In any case, Once anything near 78 to 79in oil is hit and 1085 in Gold...it is over in my opinion. I would look for a dramatic sell down and to close red...regardless of whether those targets are hit tomorrow or not.

I will post charts later. Just wanted to post my thoughts.

Back to the Future

In 1930 there was a tremendous stock market bounce....this is what they said:

May 1, 1930

“While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States – that is, prosperity.” – President Hoover

June 29, 1930

“The worst is over without a doubt.” – James J. Davis, Secretary of Labor.

June 9, 1931

“The depression has ended.” – Dr. Julius Klein, Assistant Secretary of Commerce.

Sound Familiar?

Market Observations - Resistance and Black Candles

The Russell 2000 is an interesting index. It is comprised of a high concentration of energy and financial components. It is also represent speculative small cap companies, so you can gauge the market's risk appetite from it. Well, as you can see below, the Russell has to break its high. This is a difficult task given the strong resistance and overbought nature of this market. Additionally, the Russell has been lagging which adds to the difficulty but also demonstrates a tiring market overall. The Gap Up open with a close below the Open created a Black reversal candle. These are highly reliable signals especially when they occur at trend-line resistance with divergences. Something to keep an eye on.

If the market is going to reverse down or break resistance it has to happen imminently. There is no spare time. It is my impression that people are so tired of calling for a correction that most are looking up. While I recognize this possibility is not trivial...the downside case seem much better to me and upside seems quite limited.

US 30 year Treasuries - not a pretty chart...and not a good omen for the market. Clearly, Corporate Bonds and Treasuries have disconnected...The structure for the Corporate Bonds is very clear and it looks like the ABC pattern is complete. Look out below.

McClellan Oscillator had two small consolidation moves...Friday and today...this portends a large move of some sort is likely tomorrow. Either way you want to be on the right side of what ever that move turns out to be...and it seems likely to be down to me.

A plan comes into fruition

My scenario is playing out to a tee...get ready for all hell to break loose if things continue according to plan.

Break of 1063 to 1064 starts the wheels in motion. Look at my previous Market Observation posts for my perspective.

Below is a chart from breakpointtrades.com...interesting setup on the SPX.

Some interesting charts

thanks to matt fraily, breakpointtrades.com

Man and Beast...to put things in perspective

This is an audio post. I encourage you to listen to it...I think there are a lot of lessons to be learned from Alan's exceptionally well told story. In fact, it is a life changing story...at least for me.

There are amazing correlations somewhere here that I think relate to our physiology and psychology as it pertains to trading. I imagine that all traders are born with something equivelant to a stutter and need to find a way to free themselves from it...certainly Alan's story is very interesting on many levels. Let me know what you think.



Alan Rabinowitz
Man and Beast



you can find out more about Alan here.

New York, New York - finance capital of the world...

The other day, I heard Mark Haines, doing his Squawk on the Street opening line: "...from New York City, the financial Capital of the Woorrrld"...and I pondered..."is that really a good thing?"

New York politicos and economic types have been promoting the idea of a resilient NewYork. For years, I have made it clear to anyone I know investing or living in New York...that job losses for city will not be the fictitious 50,000 or 60,000 they have tried to pawn off as real but more like 700,000 to 900,000. We have to remember that New York has been and still is one of the most over priced areas in the country to live and work. Therefore, people will put up with those consequences when they are, appropriately enough, paid very well. When the "paid very well" part goes away lots of things change. People stop buying couture clothes, buying 5 cups of Starbucks coffee a day, going out to dinner regularly, hiring a nanny, renovating their over priced condos, taking vacations to the Hamptons and paying a lot to live in an area where they are not paid a lot. Forget, the impacts of laying off that bean counter or banking executive...simply cut their bonus or base pay and the related job losses will be huge. The effect cascades to real-estate and property rentals and nearly every other business. I am quite sure that the banking/finance industry is still over staffed - at least by 25% probably more. Recognize that the pay scenario follows the path of:

1. Cut bonus and freeze base pay
2. Try to retain talent risked by cutting of bonus/freezing base - increase bonus 
3. Next Cut bonus again and lower base pay
4. Finally the lay off

So, there bas been complacency in finance in New York since the big banks got to steal even more money than they already have through their fractional reserve money creation ponzi schemes and in that the hope somehow they can continue to delay the inevitable. But, if there is one lesson to be learned from the banking industry, it is that they hired a lot of bean counters, model builders and day dreamers to attempt to do simple math by making it extraordinarily complex - and they failed. A bean counter who can not add - is definitely not worth base pay of $200,000+ with a performance and incentive bonus six digits more. That guy needs to be FIRED NOW...but he got a reprieve so far - yet look at the results in the articles below.

We do not need more bean counters, we do not need more bureaucracy, we do not need more starbucks, credit cards, taxes, brokerages, developers, real estate agents, strip malls, shopping centers, government agencies, bailouts, banks or regulations. And we definitely do not need more bankers!

If you look at the numbers, the average american spends a significant amount of time and resources every year dealing with filling out government related forms and complying with trivial or unecessary regulations that specifically designed to create and transmit no useful value and contribute no useful capability or potential. The subversive mechanisms that the government uses to continue to steal value from value creators and transmit that value to value debasers results in a continuing increase in the amount of potential that is wasted. Once that potential is wasted it is gone. 

The mechanisms are really are amazing and imaginative. Cap and Trade is just one recent example, but many other useless permits, licenses, taxes and other bureaucratic complexities, represent an increasing overall tax on americans and businesses. Those useless mechanisms then require the support of americans, who could be doing something useful, having jobs decoding useless information that transmits or creates no value...but does generate fees. These fees are ultimately paid to bankers, this is by design (and is the reason that you should read the pieces I have written about the dollar and the money system posted in the featured articles section). But the problem is, in New York City, the emblem of this problem lives and breaths. These high powered people who can supposedly afford to live beyond the capabilities and means of almost all other americans - mostly have jobs that involve no creation of value and no transmission of value. Many finance related jobs are actually fairly closely aligned with the theft of value. Those jobs should be and will be gone. Hopefully, most of the fraud will be gone with them. But the results for New York City will be many, many more job losses in finance, and then for every 1 job lost in finance, four jobs lost in the common sectors. New York is very vulnerable. And the articles below are just the beginning of the story...and I for one do not believe that there are any positive underpinnings that are effecting NYC's real estate market dynamics. Its going to get much worse from here.

Manhattan apartment leasing down 59% in year

Rising unemployment and an increase in purchases by first-time home buyers have combined to diminish the number of new apartment leases signed in the third quarter to levels 58.9% below those of a year earlier, according to the latest Manhattan rental market report, released Thursday.

During the quarter, there were 2,549 rentals, according to Prudential Douglas Elliman and appraisal firm Miller Samuel Inc., which conducted the report.

“We saw a significant decline in rental activity from last year,” said Jonathan Miller, chief executive of Miller Samuel.

Meanwhile, the median rental price in the third quarter slipped to $2,950, down 7.7% from year-earlier levels. The drop is likely even deeper than the numbers show because more and more landlords now offer sweeteners like months of free rent and help on the security deposit, concessions that are not reflected in the rent numbers.

see full article here 

Condo prices slashed 25% at big Brooklyn tower

In an aggressive effort to boost sales, the developer of the 303-unit Oro tower in downtown Brooklyn said Tuesday that it is slashing prices of its remaining unsold condominiums by as much as 25%.

To date, just 90 units have closed and 30 are in contract at the 40-story tower in the Flatbush Avenue corridor. The developer also announced that, effective two weeks ago, it has changed brokers and will be launching a new advertising campaign focused on the price reductions and the units' value as opposed to luxury. Rose Associates, which traditionally handles the marketing and management of rentals in Manhattan, has taken over sales at the Oro from Prudential Douglas Elliman.

“The pricing will drive sales,” said Matthew Faris, vice president of Greenfield Partners, the Oro's developer. “Right now it's good to have a cohesive sales and managing team. Buyers need a lot more handholding.”

Prices on units ranging from studios to three bedroom units are being cut by 15% or more. For instance, studios are now being sold for as little as $295,000 and three bedrooms for as little as just over $1 million.

see full article here

Whose gonna buy the cookies? Whose gonna make them?

If everyone was rich again, they would buy Stella D'oro cookies and the union would have been able negotiate in bad faith - but it would have worked and these non-finance jobs would not have to have been lost.

Stella D'oro closes its longtime Bronx factory

Union, owner couldn't settle labor strife. Jobs will move to Ohio. Here's how this cookie crumbled.

After nearly 80 years in the Bronx, the Stella D'oro cookie factory closed Thursday, victim to a labor dispute that dragged on for more than a year.

The closure puts 136 workers out of work at a time when the city's unemployment rate has skyrocketed to 10.3%, a 16-year high.

The workers had been on strike for nearly a year when a judge ruled in June that the company had violated labor law and ordered the workers reinstated with back-pay to May 6. They returned to their jobs in July, but on the same day, Stella D'oro announced plans to shut the factory, arguing the union had failed to make any meaningful concessions that would stop the company from losing money.

Then in September, Brynwood Partners, the private equity firm that bought Stella D'oro from Kraft Foods in 2006, announced it had sold the company to North Carolina-based Lance Inc., which plans to move the operations to Ashland, Ohio.

A spokeswoman for Stella D'oro would not comment beyond confirming the closing. She referred to a statement the company put out last week that blamed the workers for the dispute.

“The union's strategy was to give no ground on wages and benefits, even if that meant the company would be forced to sell the business and shut its doors in the Bronx,” the statement read. “The union got precisely what it knew it would get with its strategy.”

Louie Nikolaidis, a lawyer for the union, said bargaining over the effects of the closure ended Wednesday, without any resolution. “We didn’t agree on anything,” he said. Mr. Nikolaidis contends the company still owes the workers and their union between $15 and $17 million, covering severance pay, back pay, vacation and sick pay, and money owed to the union health and pension funds. “We’ll stay on top of them and make sure they pay it,” he said.

see full article here

I have a question...

If I were to...

1. increase the number of troops by large numbers in Afganistan to fight 100 Al Qaeda operatives
2. snuff out lives of Pakistani, Afgan civilians and American military personnel alike, 
3. threaten and aggravate Iranian tensions by trumping up information that gets treated as new though we have known about it since 2006, 
4. fail to remove a single military asset from Iraq
5. mire the closing of Guantanamo Bay in bureaucratic paperwork
6. begin the process of starting protectionist trade wars 
7. solidify the misguided economic policies of the US and the Fed (and previous administrations) into a quagmire of malinvestment and deceit that will drive global economic destabilization that would, by it nature, have a high likelihood of resulting in conflict 

...then can I please get one of those nifty Nobel Peace Prizes too?

One request: Please make it possible that I be assessed based on 9 months of my stated track record.

One more question: Was Obama REALLY surprised? He applied for the nobel peace prize in February 2009 being president for less than 12 days and before he had ANY noteworthy influence on any significant foreign policy in his career. 

Ron Paul has an interesting perspective...

Market Observations - VIX kisses

VIX kissed the trendline...as expected. Now I am waiting for the reversal - should be quit a show.

The corporate bonds chart below needs no lables...Clearly the market rally is diverging with the smart money in bonds...we need to watch these bonds early next week.

My scenario seems to be coming together nicely...Dow pushed out a minor high extension and maybe we can get a little more from the SPX...but otherwise the market is most likely nearly done.

Market Observations - Shake Out?

The minimum requirement for the dollar pullback has been met...it made a new low...I would prefer to see a more capitulatory low...but I have NEVER seen so much bearish talk about the dollar...so a low is very close and in fact may be in...

As for the markets...I am watching wedge patterns that should end up coinciding with the top of our rally from the march lows.

Transports are not confirming DJ, SPX or COMP. The Transports and Nasdaq Composite are producing a perfect backtest of the rising wedge. With indexes very near their highs, the VIX is not near the lows that it was when markets were here before. Financials are showing loss of momentum and NO volume. There is also a black candle for today's close. Oil made nice moves today....but still has not broken out of its pattern...it seems like that will not happen.

One more spike is all this market has left in it...Gold and Silver and the Dollar all seem to have a little left to go...possibly satisfied by a single gap or move up tomorrow or monday...and just while everyone is looking........up!

I was going to post a chart of the dollar...but Kenny did an excellent one...I included it below...but please check out his blog at here

Russell 2000 Chart

Market Observations - Fake Out Shake Out

Nice consolidation day after two days of short squeeze...so, what's next? Well, since most people are focused on how high this move will go...I suggest we look a little deeper.

Upside targets are so close here that we can almost spit on them (pardon the vernacular). Gold 1085, Silver 18, SP500 1085 to 1100, Dow 10,100. This up move has been a torture I know. I have learned a lot about how insane people can be in chasing things...how extreme government and special interest meddling can be...how whacked the concept of herding really is once it has started. Now it is nearly complete. And we will likely have good excuses for some sort of emotional reaction. Ok, Alcoa reported better than expected earnings. And the Initial Claims numbers + Wholesale Inventories might be just the ticket. However, from my perspective upside is the one spike reaction that is left...most likely occurring sometime between tomorrow and tuesday.

Why do I think this? Well, first its the posture of the VIX. A spike high will bring the VIX back to testing its down trend line and horizontal support. These will likely formidable support. Oil. Oil has vastly underperformed my expectations so far...it should have been able to break out of its pattern. I can not rule out a breakout...but so far...the action in oil is much too divergent from Gold, Silver and the Dollar to write off. The Russell 2000 index is substantially lagging the SPX...given the energy components and financials are the largest group in the index...this is a revealing condition. Distribution days are abundant on all equity indexes with uptrend lines directly above. Additionally, pullbacks recently have been getting larger at 39, 47 and 60 points. So, big cracks are showing. Then there's the Dollar itself. Supposedly, the dollar is dead, gone, buried...but it won't die. I think my alternate scenario will come to pass here as I indicated recently. A spike in inflation assets will be combined with a spike lower in the dollar...possibly into the 74.50's or 75's - but it does not have to go that far. Best would be to take out recent lows. Overall the chart of the dollar is looking pretty complete.

Again, I want to underline that the key to the market is the dollar. I have been working on several pieces chronicling China and JP Morgan. We should expect a currency move to drive the markets. China, is on life support - despite what the popular belief is. Not to mention Japan. A stress from an Asian financial system is something coming out of left field for most people...especially Peter Schiff or Marc Faber...but that is exactly what we are most likely going to get.

In any case, what I am looking for are elements that cause conditions for a swift reversal. A quick up/down reversal may not occur...and the market may want to drag this thing out...but I think everyone is too worn out for that...we should be watching for a reversal to occur just when everyone is analyzing targets for the up move.

If a quick reversal does not occur...fine - no damage done. But I think that it is appropriate to treat any spikes as high risk reversal possibilities...and err on the side of downside bets in those cases. If you ask, at this point, what people are expecting - I would think bears are looking for more torture and bulls are looking for continued upside. The only thing both camps are not looking for is a bullish move up and a bearish move down in the same time window. But that's what I am looking for.

Another one -" The demise of the dollar"

"In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years."

What I find interesting about this is that it will make all the inflationists to happy. However, as we have seen with this market NO trade is allowed to be easy. On that basis alone, inflationists should be careful about counting chickens. But clearly the dollar move as I indicated in my "Market Observations" post last night is not complete. I think my alternate scenario that I have been discussing has gained stature. I expected the dollar to rise to the upper boundary of its diagonal. It has not even done that before breaking decisively below it once more. Today's market is very important. If we can get selling into this gap - that what I want to see...that's the only thing that will keep the current market structure pointing immediately down.

When all the rappers decided to get paid in euros rather than dollar's that was the top in the euro...I guess when the manipulators and government officials decide to do so also...they will be equally well or better timed. 


see article here

Market Observations

Ok, I have been remiss...I did not feel that well today and did not get around to posting until now.

First lets look at the markets. I have my concerns. It is easy to paint a bearish brush on the market in the form of market structures or counts that are bearish until they are not.

This is what I see:

1. Gold looking bullish. 
2. Dollar under resistance and not impulsing
3. Oil looking like it may want a push up
4. Gaps remaining to be filled

Ok those are not buy signals, but they are warning signs that the market may want to probe up for a better retest. The charts are not making me comfortable.

What am I looking for? 
What would make me comfortable, would ideally be a gap up tomorrow followed by an energetic sell down reversal. This would apply to equities, Oil and Gold. However, I am concerned that we can get a fake out here and end up with a rally back to test some gaps and resistance in the 1050 to1060's. There is a benefit to this occurring if it were to do so. Bear's who have finally gotten a taste of a small win after being beaten up may misinterpret a move up to retest as something more bullish than it would likely be. Additionally, it would serve to convince weak handed bulls, that the waters really are safe and they can buy dips even if they are scary ones.

One of the negatives to any move up in gold is that silver has reverted of its old warning signal of non-confirmation. We should see Silver remain in a non-confirmation of Gold if we do get a pop.

VIX has triggered a standard dev short-term buy signal and there are still a lot of constructive looking charts out there. So, all of this should not surprise to work together to create a push up into the Wednesday to Friday area. Gold, Oil, and Equities...are what I am keeping an eye on. I am just laying out a case. Its not a bullish case, but certainly a push up here will feel bullish to a lot of market participants...and that may be the objective.

CCI array is showing supports here and a potential bounce. But we are getting high quality divergences (plotted over prices) that usually only occur at tops and bottoms for the daily SP500 emini futures.

While I am not in love with the count below for Oil, it is not totally out of the question...its on the table.