Fed juice

The FED really talked up the market and the economy in it's release Wednesday.  It was almost like a parent sending their kid off to kindergarten.  Given the recent reactions to central banker commentary, they are probably starting to think they can talk markets up.  Adding in the talking it up variable really makes this operation more complex.  They'll make some miscalculations, they're human.  The question is when and how big will they be?

Lest we forget the FED's prime time player Bernanke is gone.  He was the orchestrator.  Are the Heat the same without LeBron James?  Hell no.

The stock only A/D line hit it's upper boundary Tuesday.  Often this coincides with very short term tops.  It'll be interesting to see how much we pull back here.

Trade 'em well

Rotation Report: Juice

Shorts are being squeezed like none other.  It's an interesting landscape out there with some potential signs of a bottom like breadth and sentiment.  Also, there are a few unmet measured moves lower.  If we make new highs in semi's and SPY, that'd speak to how strong this move really is.  

It seems like everybody is waiting to see this next dip/pullback/whatever to judge the market's strength.  I know I am.  Maybe that's not how this plays out.  We'll see.  Let's dig in.

The NYSE Composite closed the week right at the trend-line connecting 2009 and 2011 lows.

The NYSE Advance-Decline line is still tracking the S&P 500. 

There were some false breakdowns in the growth to value ratios.  Now we're seeing upside breakouts  The market seems to want beta.

The Show-Me-Tell-Me ratio has completely stalled out at the falling 50D.  It's been stuck for over a week now as the market advances.

VIX term structure sure eased up on the fear sure quick.  Note this level acted as resistance in August and September.

Airlines are back at major resistance.  They already broke RS resistance.  Impressive stuff.

Retail RS has been a dud.  Where is that extra boost from the gas tax cut?

We're at a key point in the developed - emerging markets ratio. 

The Middle East ETF could be a large continuation wedge

The euro's weakness is incredible.  The 2013 lows are acting as resistance.

Speaking of weakness, the CRB is in a strong downtrend thanks in large part to oil.  Price is compressed and looks near a meaningful move

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Crude continues to hold it's LT support line

Gold relative strength is still a mess after it's false trend break.  

Trade 'em well!

Gold Miners

We keep seeing headlines about Japan buying stocks and the ECB buying corporate bonds and all of that.  So I took a long hard look at Gold Miners.   After doing some work, I took a long this morning in the highly speculative gold miners ETF JNUG.

We can see the recent consolidation has started working off a major oversold condition.  This thing appears to be a choppy mess, but surprisingly the 10D MA is curling higher.  I also find the RS downtrend break interesting.  Today's gap up is what i'm trading against.  There is clearly some resistance at 22 and above that there is room until we hit the falling 50D in the 23's.  It may be best to wait until 22 gives way.  

The weekly view shows the GDX testing 2013 lows.  Who knows how this plays out, but there are oversold conditions being worked off with the MA's still needing to catch up.

    Trade 'em well!  Thanks for reading

Shopping

One emerging theme in the markets is the giant consumer tax cut via falling gas prices.  With this tax cut and the U.S. holidays coming up, Dave Chappelle says it best:

Women be shoppin'!

They be buying bags

They be buying product

They be shopping on the TV

They be using coupons 

They be buying their kids sporting goods

They be buying their babies toys

They be buying their favorite coffee

They be buying ugly shoes

They be buying for their pets

Men be shopping too!

They be fixing their cars

They be fixing their homes

They be buying hunting/fishing gear 

Imagine if we could knock gas prices down a little further?

I want to watch these consumer names as a tell on the group.  I look at the consumer/retail group as a directional toss-up.  We'll see if people really be shopping as we get closer to the holidays and get through earnings!

Trade 'em well

Some market thoughts

There is compelling evidence for both another sharp drop in the coming weeks and a meaningful bottom.  The weight of the evidence leads me to think we are headed significantly lower from here.  Or perhaps better put, i'm willing to miss fresh + trading opportunities to the upside for now, because the downside risk is unusually high.  Earnings complicate things as well from an investing standpoint.

Buyers Wednesday and Thursday did a fantastic job buying with a cushion.

The price structure in the indices are pretty fragile.  Last week's late week saves were impressive and saved some uptrends.  There are open measured moves significantly lower all over the place.  By the way, there were no price divergences on the recent low.

Right now there is very little in group relative strength analysis that supports any market bottom.  The price structures mostly suggest continued defensive positioning.  The one interesting space shaping up is housing and home maintenance.  That might be the most bullish thing I've seen this week.  Or it might just be a sign folks are taking that extra gas money to do necessary repairs on their homes.

Sentiment makes as compelling a case as any for this current bounce to be meaningful.  The Ebola story went from stable to completely out of control on a very small scale in just a few days.  If we measured the RoC of the story, momentum likely bottomed out at least near term.

The central bankers think they can keep the markets up, but the broad worldwide picture seems to indicate it's too late.  The law of diminishing returns has been in play for years now, and QE has been reduced to a crutch to keep the European bond market together.  That'll only last for so long.

Volatility is awesome right now.  If you lack conviction in stocks, you can play other markets.  Short Nat Gas has been a trade that I've shared on stocktwits.  The movement is spectacular with gap downs and rips during the day.  Also, the short yen trade looks pretty interesting.

Rotation Report: Trader's Paradise

It's a wild market out there.  The volatility is fantastic, it's a real trader's paradise.  There are plenty of unknowns, a ton of earnings these next two weeks and sentiment got ahead of it's self in a meaningful way last week.  Good luck prognosticators.  Let's dig in.  

Crude oil held key multi year support.  It's hard to be negative oil here and now.

XLE did a fantastic job holding the long term trend.  The question is, can it stay above?

Airlines had a wild week, but were unable to regain the break down level Friday.  This group is why we're in markets right?  The long term trend is up and falling energy prices are bullish, but Ebola uncertainty is only growing.

Breadth and sentiment indicators have become a mess recently and have offered little value.  However, the one sentiment indicator I trust most flashed a buy signal Wednesday.  This suggests a significant bottom is in.  It's possible we've reached max fearbola.     

The VIX may just have had the most epic false breakout of the year.  I'm also following the 10D MA and ~18 to pull more information.

The Russell 2000 re-tested the breakdown to end the week.  The odds still point to lower.  We have an open measured move 12%

The S&P 500 ETF also re-tested the August low on Friday.  Clearly, the action early next week is important.

The S&P dividend ETF relative to the S&P 500 is testing long term resistance.  We see the quick recent run to safety.  Will it continue?

The show me to tell me ratio AKA Russell 2000 / Dow Industrials is still down-trending and just re-tested a breakdown on Friday.  

The Nasdaq to long term treasuries ratio is broadening out.  It just doesn't know what to do here.  It seems this near term bounce has more legs to it.

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Treasuries sure appear to have capitulated this week.  The trend is still strongly higher, but this is going to be interesting to watch.  

One of the more surprising rebounds of the week was the home builders.  There's still a lot of work to do, but it's worth eyeing if last week's low holds.

XHB RS broke a half year downtrend after bouncing at the popular .618 retracement.  Keep in mind this is much a home maintenance ETF as it is a home construction indicator.

Real Estate relative strength is breaking out in a big way.  More signs of a search for defense and yield.

Real Estate relative to tech hasn't broken out yet, but the larger structure suggests it will.  It's probably safe to say the P/E in tech is about to shrink.

Apple reports earnings Monday night.  Anything is possible, but with the recent triangle breakdown, the risk appears to the downside.

The dollar/yen re-tested and bounced off the prior highs.  Illustrated via YCS:

Trade 'em well!

extremes

These are some fast moving markets out there.  Today we saw numerous possible extremes and a massive EoD rally.  Let's dig in.

The weekly close in VIX matters.

XLF held onto major support like it's life depended on it.  It does.

The Gold ETF relative to the S&P 500 ETF broke it's near term downtrend, but didn't hold at the end of the day.  Are we at a bearish extreme?  Thursday will tell us plenty.

Gold itself is just about testing the falling 50D MA.

The S&P dividend ETF relative to the S&P 500 hit trend resistance today.  Another bearish extreme hitting here?

The IWM is outperforming the Dow this week.  We see a massive resistance level coming up soon.  Looks like a breakdown backtest to me.  Note the 50 and 200D MA's are now trending lower.

The At The Money sentiment indicator went off today.  It suggests negativity is at an extreme.  It was very helpful in the last two years, have conditions changed that much?  We'll know soon enough.

The NYSE stock only advance-decline line has wildly diverged and didn't touch a low today.  A clear bullish sign here.

Trade 'em well