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.

Read More

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). 

Read More

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.

Read More

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.

Read More

"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.

Read More

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:

Read More

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. 

Read More