Thursday, July 30, 2009
Wednesday, July 29, 2009
I think there is high possibility that we are at or near the intermediate top. Dow Jones is as high as it was back in Jan 6th 2009. Does history repeat it self?
We will find out soon what is going to play out. This forecast is in absolute contradict with my inverted head and shoulders pattern article. I recommend to read both then decide which one makes more sense.
Pay attention to GDP data, on Friday we are going to get the GDP that will shake the market.
Tuesday, July 28, 2009
I'd like to point the most recent bear market that most likely you are very familiar. Obviously the current bear market is much worst than 2000-2003 bear market, to me this bear market is very similar to 1929 or 1937 bear markets, but it would be suitable for you to refresh your memory.
During the 2000-2003 bear market, the S&P500 made 9 significant drives lower and 7 bear market rallies. The average decline was about 18.85% and the average rally was about 17.40% which means the market recovered an average of 73.06% of the prior loss. The speed and magnitude of the rallies in a bear market are quite seductive. In my opinion being early is just not worth the risk, because no one knows when are we going to hit the bottom.
when I take a close look at the S&P500 chart I can not convince myself that bear market is over.
2000-2003 Bear Market
1) ~14% _____~11%
Monday, July 27, 2009
this picture is taken in Paris, July 25th rally. 500 Iranians and French women used Neda's pictures to show their support from Iranians movement .
The Green Scroll is the world longest petition scroll. The Green Scroll Campaign is a campaign by Iranian diaspora to make world's longest green scroll covered by signatures of iranians from all over the world questioning the legitimacy of Mahmoud Ahmadinejad as Iranian president.
Sunday, July 26, 2009
S&P500 has formed broadening top pattern which is very bearish, but it contradicts with inverted head and shoulders that I mentioned in my previous post. If broadening top wants to come to play S&P500 should not move above 1050. I think my bearish scenario has very high chance to come to play . We will find out soon which scenario is going to become reality.
Saturday, July 25, 2009
In May 8th I gave a bullish scenario "What if this rally has some legs!" to read this article click here . This post would be a follow up to my May 8th article. If you are one of my the hardcore followers you know that I'm not bullish by no measure. We got a pull back that I was looking for big institutions managed to jump back in and save the market. As long as S&P500 stays above 880 and Dow Jones hold on to 8087, bulls would have the upper hand. I remain sceptical; I'm not sure if this is a real bull market rally or just a bear market rally. I'd like to point the possibility of bullish scenario.
Despite a lack of fundamentals to support this rally ,technicals look perfect for continuation of rally. It's up to you to base your investments on pure technicals or not. In May 8th article I pointed a possibility of inverted head and shoulders, the scenario is getting closer to become reality. As you see in the chart Dow Jones has formed the inverted head and shoulders pattern, that is very bullish, if this pattern wants to come to play it has to stay above 8800 the target will be 10300-11500 which is much higher than May 8th forecast(9800 to 10200). Let's see what is going to play out.
77% of companies listed in S&P500 beat the estimate that is very impressive. 14% missed and 9% where in line, you might say this is fantastic, but here is the catch their year to year earning dropped in average of 31% and actual earning growth dropped 23.1% .
I bet you are scratching your head. Off course the talking-heads in CNBC and Bloomberg would not show you other side the coin, their job is to sell you stocks.
Can you guess how 77% of companies could beat the analysts estimate?
They came with this numbers just by cost cutting; they closed factories and fired employees to save money.
There is nothing wrong with cost cutting, but cost-cutting can only go so far. Here is the question, how many employees can they fire 3rd and 4th quarters? Which factories are they going to close next quarter to save money? Be smart read between the lines, DO NOT LISTEN TO TALKING HEADS IN CNBC. Think about it, they didn't see this crisis coming... how could see the way out!!!!
They say unemployment is a lagging indicator, but when it reaches +12% it becomes leading indicator. The government unemployment data is not accurate, they do not include people who gave up and no longer looking for job, plus the mix the raw data with seasonally adjusted data with dilute the unemployment rate. The real unemployment is above 14%.
As I said before, it's better be safe than sorry. This is not a bull market rally.
The majority of companies who announce earnings made less money compare with the 2nd Q 2008 therefore bulls argument to justify this rally is a big joke.
Technical look perfect to for bulls, and there is a strong argument for continuation of rally, but all indicators show overbought,and there is a chance for fomation of "Broadening Top Pattern" in S&P500 plus fundamentals are not getting better, therefore I went short the market on friday, if I see I'm right. I will add to my positions in coming days. If you want to speculate and buying stocks that's your decision, I don't gamble with my money.
Friday, July 24, 2009
I monitor the market every day, if this is not your main job you should not short the market. I think this rally is overdone and I feel very comfortable with my positions ,but I will get out my short positions if S&P500 stays above 1050. If you follow my blog you should know that I'm a short term trader, I don't keep my positions more than a couple days in bear market, if you agree with my analogies and you find it helpful, you might get out your long positions instead of shorting securities, remember "cash is gold".
Thursday, July 23, 2009
I have to admit it's very impressive.I'm scratching my head. This rally does not make any sense. If S&P100 wants to move higher it must to stay above 447. If it does the target will be 480-500. I'm getting ready to go short soon, Yes you heard it right.let's see what is going to play out.
Wednesday, July 22, 2009
NASDAQ is right beneath 360 EMA if it breaks the 360 EMA, there is nothing to stop the rally until it hits the ~2000-2100(the upper side the channel). I'm not bullish there is no fundamentals to justify this rally ,but I just want to point the possibility.
Tuesday, July 21, 2009
S&P500 has break out the main channel on low volume. To me it is the warning signal.
S&P500 has rallied more than 7% in past 6 days, you should ask your self what has changed that caused such a huge rally?
I will go over the second quarter earnings in detail on Friday, but so far nothing spectacular come out the 2nd Q earnings with the exception of GS (Goldman Sachs).
S&P500 broke the short tern down trend on Wednesday July 17th, and in past 4 days has managed to stay above it ,plus it has broken the main channel, and channel-2 that is very bullish. S&P has entered into the channel-1 (see the chart in blue) that from technical perspective it is very impressive ,but here is the catch, WHERE IS THE VOLUME?!!
In my opinion what we have seen in past 6 day is just a huge shoortsqueez and nothing more, but it's too early to come with conclusion.It seams big institutions want to send the market higher,but as I mentioned in my previous post I need more time to digest recent moves to determine if it's a breakout or fake out!
Friday, July 17, 2009
Fundamentals support lower natural gas prices due to "The Great Recession". Many analysts including me, believe there is too much supply and not much demand. The industry facing crisis, and financial crisis hit the industry badly,banks don't lend and lower natural gas price makes the situation worse. Lack of financing has positive side too, it effects the supply and when economy recovers it will help to stabilize the price and ultimately we should end up with a jump in natural gas price and other commodities, but that's very far future. I see a deflationary period before we enter the inflation era. Note that we won't reach the 2008 highs anytime soon, that was due to hedge funds speculation and market manipulation.
You might ask yourself, What could determine long-term natural gas supply, demand,
1)Incremental cost of supplies.
2)Supply and demand.
3)Price dynamics – impact on supply and demand.
4)Adverse effects of Dollar value on commodities prices.
5)availability of money to finance projects.
6)Demand response to price.
From technical perspective recent shortsqueez made UNG in the short term neutral to partial overbought, but in the long and intermediate terms UNG is very over sold. As I mentioned in my post back in June 8, 2009 "This is a pure speculation trade, with no fundamentals to back up, you need to know that you like a tiny gold fish who jumps in the shark tank, they will swallow you in blink an eye, I would wait for big guys to find the bottom before I jump in.
I need to remind my readers that three out of the last four years,
forward prices have surged in the spring and fallen by September. so seasonally we should see natural gas price head lower,but If UNG could move above $17.70 it would be very positive for natural gas in the weeks to come.
Mousavi supporters came to streets before Friday worship. Riot police and Basij used tear gas and batons. Iranian government disable SMS and mobiles again. Many demonstrators have injured and many got arrested.
They chanted slogans to support Mousavi and some slogans were against supreme leader, Russia and China due to their roll in Ahmadinejad coup in Iran.
Many were reported to be wearing green bands to indicate support for Mr Mousavi, and some could be heard chanting "death to the dictator" and "Allahu Akbar" [God is great].
Basij militia Tehran July 17th
A girl got injured on Friday demonstration(July 17th)
Thursday, July 16, 2009
I'm in side line,I went short when S&P500 failed to hold to 940 and I covered my short at 890. I step out to get a better view on market. I'm hoping by Monday or Tuesday I get clear view.
I'd like to get your attention to CIT group situation. CIT could be a market mover too.
943 is the level to watch. If we close above it by Friday and on Monday S&P500 stays above it to me it is the signal for S&P500 rally.
As I said many times before, fundamentals do not support this rally I'm not going to repeat myself and go over every single of them ,but you can check out "Popular Articles",but it seams fundamentals do not matters these days. If S&P500 takes out 956 technically is very positive.
Wednesday, July 15, 2009
S&P500 has rallied higher than I anticipated . I was looking for it to run out steam at 923,but it passed it. It became extremely overbought in short term. The right shoulder has completed and if it won't head lower within next 2 days and violate the 940-950 the Head and Shoulder pattern will be out the window; then the doted black lines will come to play that makes new uptrend channel.
In monthly forecast and my last week post I mentioned we could get a bounce from 200 SMA, and S&P500 exactly did so, as you see the the chart above, it stopped right beneath the 200 EMA as anticipated. If it takes out the 200 EMA and stays there for a couple days it is going to test 1000.
I don't think it has enough steam to reach the 1000, but it's smart to be open to the rare events as Nassim Taleb said in his book "Black Swan".
The bull trap scenario is going ahead nicely, market became neutral in to partial overbought,but we could go higher little more before we head lower.
If I got the analogy right S&P500 should run out steam at ~920 to ~930 levels that complete the right shoulder, Then it should head lower. Note if S&P violates the 940 the head and shoulder scenario won't come to play and we should get a rally up to 1000. Lets see what is going to play out.
Monday, July 13, 2009
Friday, July 10, 2009
S&P500 is bouncing around 200 SMA in the past 3 days. Market is very oversold in the short term . I would like to see a bounce to 908-915 to trap hardcore bulls or as I call them "Incurable Bulls" then big move lower. If this scenario play out, the picture would be perfect, but obviously market doesn't care what do I think, It does what market does best. it would surprise us. We are in No Man's Land, we are at lower side the downtrend channel and near 880-875 support, therefore we are due for a bounce.
Next week GS,INTC,JNJ,IBM,JPM BAC,C,GE, will announce their 2Q earnings.
Thas should drive the market. Banks probably will come with better than expectation earning due to:
1) Relaxation of accounting rules by FASB from "mark to market" to "mark to model"
2) Fix income earning. They receive 0% APR from Fed and Treasury and lend +5% rate to businesses.
3) Short term investment in securities, they mostly use the TARP founds to trade securities instead of lending to businesses.
S&P500 Bull Trap scenario:
I came with this term any time I want to talk about speculators who put their heads in the sand and close their eyes to realities and try to sugar code every single news to fool themselves, investors who think hope is strategy, speculators who are not going to accept they could be wrong...
I hope none of my readers are categorized as "incurable bulls" (;
Thursday, July 9, 2009
iShares Barclays 20+ Year Treasury Bond, May 18th.
iShares Barclays 20+ Year Treasury Bond, June 4th
iShares Barclays 20+ Year Treasury Bond,July 8th
This is the 4th posts on treasuries, so far my forecast played out very well.
Treasury could hold on to $88 support and it is railed nicely. it became overbought in the short term, it would be very positive if treasury can stay above "S1". keep an eye on it if it drops below "S2" and stays there over 3 days.
Tuesday, July 7, 2009
Sit tight for 2Q earning. Tomorrow after market closes Alcola Inc (AA) will announce 2Q earning; analysts estimate is $-0.37 per share. It will be a market mover after hours and Thursday.
S&P closed below the 200 SMA ,if it fails to get back above it with in 2-3 days it would be very negative for bulls. The next supports are 880-875 and 860.
If we get a bounce then head lower, picture would be perfect ,but we could rush lower without last push up.
S&P500 in short term: partial oversold
S&P500 in intermediate term: extremely overbought
S&P500 in long term: oversold to partial neutral
Monday, July 6, 2009
S&P500 in short term: neutral to partial overbought
S&P500 in intermediate term: extremely overbought
S&P500 in long term: oversold to partial neutral
If S&P500 could hold above 919 for 2 days or more it would be very positive for bulls, but I doubt it has enough steam to hold above 919.
Friday, July 3, 2009
Thursday, July 2, 2009
S&P500 has formed the Head & Shoulders pattern, we could get a bounce from 200 SMA or 90 EMA ,but it should not last long. as I mentioned in my previous post if S&P500 moves above 940 the head & shoulders would not come to play.
If S&P could move higer than 940 and stays there for 2 weeks the dotted black channel will come to play .Bullish target will be 1000. Let's see what is going to paly.