Schizophrenic Market.

Yahoo Finance heading! This is true I suppose. In the morning I twitted the following:” Not shorting yet. I think the correction if any will be shallow and more in time than in price. No definite trend change yet”. And it was more of the same. There may be odd trading chances now and then for the day traders but nothing good out there for swing traders.  Let us not forget that the triple witching is this week and all sorts of funny things will happen which cannot be explained. VIX closed outside the BB and could be a possible sell set up as and when VIX closes inside BB. But even that may not go far enough.  Tomorrow is FOMC and the Pavlovian Dogs are again salivating in anticipation of some indication of QE! Talk about moral hazards.

US $ started the day on a very promising note but gave back all the gains during the day. Even then PM had difficulty holding on to their levels. Gold hang on to dear life at $ 1700 level and Silver fell quite a bit. I am staying clear of PM till the cycle bottom by end of March- mid-April. I would not be surprised by another $ 100 fall in gold. But that would be a good entry opportunity.

We are supposed to buy low sell high. But is it surprising to find out that retail investors always do the opposite?

From the chart you can see that when the SPX falls, retail sell into it. And when SPX rises retail get invested. The current set up is no different. With SPX at or near multi year high, sentiments overtly bullish and complacency dangerously high, investors are going long or staying long. While I would not recommend shorting yet, I wonder how anyone can go long now. May be they know something which I don’t. But then when all the central Bankers of the world are flooding the world with liquidity with the only purpose of keeping the share prices high, all we need to do is BTFD Just look at all the free money in USA:

And in Europe.

Even with flooding the continent with that kind of money they have not been able to avoid a Greek default. Nor will they be able to stop Portugal or Spain or for that matter Italy. It may not happen in 2012, but it cannot be postponed much further. In short term, everyone and their Grandma is expecting a correction. The BOYZ know that and they are keeping the market artificially afloat. There are two things going on here. On one side, they want to bring in all the cash sitting on the sideline and on the other hand they want to kill the entire short. This, before their best friend Ben comes with free money. In other word, kill the maximum number of long and short. Based on this theory and my cycle analysis, I do not expect any major market correction before mid-April. My evil plan says that we will see some weakness by end of March, followed by a blow of top rally, which may take us past 1400 in SPX and then go down for two months before QE3 starts.  TA be damned!

There is nothing much to add to the trend table. So, stay nimble, trade safe and do not front run based on your bias.

Thank you for reading http://bbfinance.blogspot.com/ . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

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Hurry Up, Sit Down and Start Running!

Bizarre as it may sound, this is what happened in the stock market last week. Like a dog chasing the tail and going round and round. When the index fell in the 1^st part of week, remaining bears started making noise. ZH was painting the town red with the news of coming   Eurocalypse. And I was telling readers to wait and not to front run. I said repeatedly that trend change is not confirmed and whipsaw is expected. Technically the market was oversold to start with. Again, as absurd it may sound that while the prices were making higher high, the market was oversold, it was true. How can we expect a decent sell-off in such a situation? And not to forget, the cycles were showing a top due by March 6-9. Last I said, may be Friday, March 9 will be the fade date.

So where we are now and what do we expect in the coming week? For answers, let us look at some common, garden variety TA charts. The 1^st one is NYMO which reflects the market breadth;

NYMO was in deep oversold territory and is only just coming above zero line.

While on the other hand NYSI has turned down quite a lot and is trying to move up a bit.

RSI in NYSI is in deep oversold region.

BPSPX which shows the bullish percentage index has reached the historical high and has started turning down. 

Read together, I get a feeling of indecision. While the market has lost upward momentum, it is not ready to plunge down as yet. Taking a position in either way is blind front running.

Normally Fridays have been the most bearish days for quite a while. Also, normally NFP days behave either as start high go lower or start low go higher. But this last Friday, it did not do either of the two. I twitted before close that I am not shorting the market, yet. On the bear side, the price action can be considered as testing the previous high which it had failed to breach. But on the bull side, it did not break down the lows either. Friday, both the “Risk on” and “Risk Off” trade moved higher. Equities, gold, oil etc moved higher. As well, bonds and USD moved higher.  One of the asset class is not behaving truly and we do not know which one. Only point to note that FX carry trade favourite AUD was moving lower while equities were moving higher.

US $ made solid gain on Friday and Euro moved below 1.3200.

 But it is no guarantee that Euro and AUD will not come up now that disorderly Greek default has been avoided. ( It is a default anyway) If you put a gun on my head and ask me to make a wildest, est, guess about market movement next week, this is what I would guess. This is SPY hourly chart:

There is a bit of gap on the downside which may be filled in the early part of the week and then go up again by OpEx. Again, this is just for fun and do not trade based on this. Never.

Do not forget next week is triple witching OpEx. The BOYZ will screw maximum number of people. It is better to avoid the shark infested water unless we are very sure of what we are doing. That is the reason I did not want to hold any position over the week end. I may take a stab at the market on Monday morning depending on what kind of strength or weakness it shows at open. The good news is (for bears) the cycles show a short term bottom by the last week of the month. And we can expect the major sell off to come in April.

So, stay nimble, trade safe and do not front run based on your bias.

Thank you for reading http://bbfinance.blogspot.com/ . Hope you are enjoying the weekend. Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

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EOW Analysis Tomorrow.

I will be raking my limited wit to come up with something interesting about what happened this week and what can be expect next week. I hope to come up with something worth saying by tomorrow.
So enjoy your weekend evening with your family, friends and loved ones.
That is most important.

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Told You So.

Pardon me for saying that. But I have been writing for the last few days not to short the market and that whipsaw is expected. I wrote that such a strong up-trend will not turn on a dime and it will re-test the highs. So it did yesterday and today. I think it will make one last effort to break the 1378 mark and then roll over. For the bears, the good news is the previous high has not been broken and we are on track for 1-2-3 trend change. By the way, the cycle high was between March 6-9. So tomorrow may be the ultimate fade date.

We still do not know the end result of PSI but it is still a default. All kinds of numbers are floating around. What the market is celebrating about?  Sovereign default is positive for the market? Next in line is Portugal and Ireland. Ireland will be holding referendum and Brussels is uneasy about it. Spain has given middle finger to EU and has told them to shove it you know where. Only way the market can go up is when Bernanke shows up with more free money. The question is who will wink first. The TBTF banks or the FED? I think it will be the FED. Expect QE3 in any name by June 2012.

Yesterday I wrote that with NYMO so deep in negative it is difficult to have any sustained sell-off. The smart money has already distributed at the top. The entire ramp job is to lure in the dip buyers who are sitting on the sideline. But NYMO is still negative and I would expect it to get above zero 1^st before we see the real deal.

I am not sure how this is going to work out. Friday has been the most bearish day for quite a while. And tomorrow is also a NFP day. The pattern of the NFP day is open high, go lower or open low go higher. I will take a call in the morning about taking a short position. Tomorrow is so very important!  In the middle of all the euphoria, gold struggle to get past $1700. I think something is not right the goldiland.

I have updated the trend table which is as follows:

But I am not taking any action as yet because after a long period of trending, market is now choppy.

So that’s it for today.  Thank you for reading http://bbfinance.blogspot.com/ . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

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Is this True?

http://www.telegraph.co.uk/finance/financialcrisis/9129838/Greece-on-brink-of-default-as-bond-deal-falters.html

Anyone has any info on this?

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Rumour Worth 10 SPX Points!

It was just another confirmation that the powers that be do not want equity prices to go down.  So when DOW goes down 200 points what do they do? They spread rumours of coming QE3 through their boot-lickers. Would anyone still consider anything coming out of WSJ remotely creditable? The following chart from Ciovacco Capital says it all.

Anyone who still believes in free market, should get an appointment with doctor!

The bounce today was totally expected. It is the size of the bounce that mattered. Depending on whom you talk to, the resistance was between 1350 and 1360 with the strong resistance at 1355.

SPX made little attempt to break 1355 and settle peacefully at 1353. With the news coming out  for ECB rate decision and  Greece PSI deal or no deal tomorrow and the NFP day after, it can be quite volatile in short term. But so far the feeling is, we have seen the top at 1378. If this is the beginning of the bear market, bears will have ample opportunity for the kill. So it is better to wait and avoid any whipsaw.

Yesterday I talked about the very low NYMO or McClellan Oscillator. Today it recovered a little but is still well in the over-sold territory.

It is difficult to get a deep sell off from this level, although not impossible.

I think we will see serious weakness in the 2^nd half of March, after triple witching. There are three levels of weakness/ correction we have to look for. Streettalklive .com has a very nice chart explaining these levels:

 In the department of fancy charts, nobody can beat Eric Swarts. He has his fancy analog chart out today which is as follows;

The analog matches with what I have been saying for the last few days that we will get a re-test of the high again and only when it fails we can look for a deeper correction. I would suggest caution at this point of time and personally I am on the sideline and waiting for a better trend to emerge. Let the trade come to you.

I have not been able to update the trend table today and my apologies for that.

In the reading department we have a couple of interesting reads:

GARY SHILLING’S 6 FAVORED ASSET CLASSES | PRAGMATIC CAPITALISM

Time to Get Bearish? | The Stock Sage

Thank you for reading http://bbfinance.blogspot.com/ . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

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Hallelujah?

The long awaited 1% correction came today. Most of the people have forgotten by now what a correction looks like.  Did CNBC report that lots of people have broken their monitor because they thought the monitor has run out of green pixel?

Is this the start of Bear market? I do not know but it is still early for complete trend reversal. For a very short term, say just for tomorrow, I would expect a bounce after such a hard sell. For another, some of the indicators like CCO, ChiOsc and StockRSI are very low for a continued meaningful downturn.

Not to mention that a strong up trend cannot reverse immediately. Indexes will definitely try to test the highs and only when the next attempt fails, we can be sure of reversal.  The situation is very volatile and while we may see a green day tomorrow, it is also assured that we will see a lower low in the next few days. It is a good set up if you are a day trader but a lousy one for a swing trader.

With the McClellan oscillator below the zero line for the past 10+ days and standing at -266 level, it is difficult to see further down immediately. So my theory of a bounce tomorrow fits well into this when it can add some height and then continue to sell some more. Problem with this line of thinking is everyone is expecting this set up and the market may throw a curve ball and continue to sell-off.

Gold sold off another $ 35 and silver also joined the sell express. I expect more selling ahead for PM.

The trend table is turning red slowly but I would hold on to go short immediately.

While the “Advance Decline” line has turned south and lots of other indicators are signalling sell, I expect a whipsaw. I would be more confident to take action when all the indexes have moved together in one direction. Better be safe than sorry. I have done it in the past, when I have jumped the gun and paid the price. Instead of chasing the trade, let the trade come to us. I keep reminding myself that preservation of capital is the 1^st priority. So now I am willing to give up some of the profits to make sure that the trade will move in the right direction.

Thank you for reading http://bbfinance.blogspot.com/ . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

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