The market got a lift on Friday from The Employment Situation Report, also known as the Labor Report, but the next one to watch will be the The Monthly Wholesale Trade Report which is due on the 9th.
In the Monthly Wholesale Trade Report is the inventories-to-sales (I/S) ratio, which is very closely watched. The Durable Goods Report is also watched almost as close and sheds some light on the durable sales figures. Any more good news like we saw Friday could easy send this market higher into Jan 2010. Stay on your toes, and watch the charts close knowing what to expect on the reaction to this next report and you will make some good coin! And don't get married to any one idea or EWT count, that is a recipe for disaster.
Below are links to explanations of other reports
Personal Income and Outlays
Industrial Production
Economic recovery occurs when these four indicators turn higher at about the same time. If the four indicators are not rising, then a normal recovery will not occur. If a complete recovery of these four indicators is far in the future, then the current gains in the stock market cannot be sustained just like in 2001. The market appears to be bracing for this one a little but, since it did not close near the highs Friday even after such a good Employment report.
Do some dd and get a handle on what these reports are really saying, and THEN you will know whether you should choose the bullish count or the bearish count.
Happy & prosperous trading to all!
Saturday, December 5, 2009
Friday, December 4, 2009
A Maturing 3-legged Bull
Geez, I just realized it has been almost a month since my last post here. I have been actively trading and most of my updates are done on my Public List at Stockcharts.com and during the day on CiL. Charts have done a great job of pointing to a top soon, but indicators can point to a top for months before even a healthy 10-20% correction. Keeping abreast of developments in the markets regarding sovereign debt to earnings announcements by market leaders is an overwhelming job for the individual trader but is it also important to keep in mind how bull markets behave and transition into the various phases. The market is entering a new phase which is characterized by longer periods between the usual 5-7% corrections, lighter volume, and wide swings within ascending ranges ( 2-3 week sideways, tight bases etc ). Stocks go into long periods being overvalued and less time being undervalued.
The one thing going on now is whether the market truly believes that the bubble will stay re-inflated after all the liquidity that has been provided. The market will get a higher multiple associated with it if in fact it feels that it is deserved and that alone will push prices higher into 2010, albeit at a slower pace. This push higher does not mean the market will hold that higher multiple, but with unemployment and the usual LEIs pointing to a recovery of some degree, the market will rise until just prior to the next major correction that will be brought on by a disruption in credit markets or a geopolitical event or something totally surprising. For now, the market seems satisfied with the movement in the US dollar and feels comfortable with it moving up off the lows lately since it is probably convinced that the rise will not be high enough to hurt equities negatively. Crossing and holding above the 1107 level in the S&P500 represents the market's confidence and willingness to take on risk. Bonds are beginning to sell off recently again and have probably seen the highs for a long time to come. This is just another sign that things are going back to "normal" (if we can call it that).
My short term projection is that somehow the market makes it to those 160 month simple and 200 week exponential moving averages around 1150 by Jan. 2010. After that, I am confident that there will be some sort of larger correction on the back of some crises in sovereign debts, currency, or other unforeseen incident.
Before you sell your gold or trying shorting it, it would behoove you to study this long term chart for $USD first! I will elaborate on it later.
The one thing going on now is whether the market truly believes that the bubble will stay re-inflated after all the liquidity that has been provided. The market will get a higher multiple associated with it if in fact it feels that it is deserved and that alone will push prices higher into 2010, albeit at a slower pace. This push higher does not mean the market will hold that higher multiple, but with unemployment and the usual LEIs pointing to a recovery of some degree, the market will rise until just prior to the next major correction that will be brought on by a disruption in credit markets or a geopolitical event or something totally surprising. For now, the market seems satisfied with the movement in the US dollar and feels comfortable with it moving up off the lows lately since it is probably convinced that the rise will not be high enough to hurt equities negatively. Crossing and holding above the 1107 level in the S&P500 represents the market's confidence and willingness to take on risk. Bonds are beginning to sell off recently again and have probably seen the highs for a long time to come. This is just another sign that things are going back to "normal" (if we can call it that).
My short term projection is that somehow the market makes it to those 160 month simple and 200 week exponential moving averages around 1150 by Jan. 2010. After that, I am confident that there will be some sort of larger correction on the back of some crises in sovereign debts, currency, or other unforeseen incident.
Before you sell your gold or trying shorting it, it would behoove you to study this long term chart for $USD first! I will elaborate on it later.
Saturday, November 7, 2009
Trade of the month? Within the next 6 months is likely.
At some point in the near future, we can expect bonds to sell off to a lower level as they have been selling into the bond rallies ever since the Fed announced that huge support for the bond market since late last year. Therefor, I am looking for entries into calls on TBT on dips from here on out.
The following charts speaks for itself and is part of the stealth rally that has been going on since March.
I am not saying that all money that is coming out of bonds is going directly into stocks, and definitely not all into US stocks, but the bond bubble has been a long time in the making and is the last big bubble to be deflated. In order to dispel some of the common myths, I thought it appropriate at this time to study the relationship between stocks and bonds. It is not a correlation that is in lock step with stocks like we have seen with the USD lately, but there is a correlation to be observed. Usually, the move in bonds precedes the move in stocks. At first, the stocks may even sell off with bonds but that is the dip that I expect will be bought if/when that happens in the coming months. Higher bond yields will give the bears plenty to gripe about, but in the end, as long as the yield on the UST10Y holds below 5%, I think the economy will continue on the path of recovery.
The following charts speaks for itself and is part of the stealth rally that has been going on since March.
I am not saying that all money that is coming out of bonds is going directly into stocks, and definitely not all into US stocks, but the bond bubble has been a long time in the making and is the last big bubble to be deflated. In order to dispel some of the common myths, I thought it appropriate at this time to study the relationship between stocks and bonds. It is not a correlation that is in lock step with stocks like we have seen with the USD lately, but there is a correlation to be observed. Usually, the move in bonds precedes the move in stocks. At first, the stocks may even sell off with bonds but that is the dip that I expect will be bought if/when that happens in the coming months. Higher bond yields will give the bears plenty to gripe about, but in the end, as long as the yield on the UST10Y holds below 5%, I think the economy will continue on the path of recovery.
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