Wednesday, September 29, 2010

Get ready for the big move in S&P500

S&P500 Technical Analysis Chart:
S&P500 has been developing ascending triangle pattern(see the chart in blue), which is bullish. It been moving in a very narrow range(1131 to 1150). It's about time to break from it. I don't know which direction ,but market is going to break out very violently. If I want to pick; I would say, if by Friday S&P500 fails to get above 1150; there is 40% chance that we are going to witness a very violent move lower.
On the Elliot wave analysis we are in sub-wave (2), if S&P500 moves below 1100; I can say for sure the sub-wave (3) is initiated. On the other hand if S&P500 gets above 1150 and stay above it for a 2 days it will shoot for 1170.

Monday, September 27, 2010

Portugal Government Bond Signalling Problem

Portugal 10 year government bond chart:
Portugal 10 year government bond yield is 6.39%; it made a new 52-week high of 6.439% recently. It is signalling more problems a head of Europe. So far none of the talking heads in CNBC nor Bloomberg talked about Portugal. Obviously Portugal has a smaller economy compare to Greece, but it shows the European problem is not isolated to Greece. It is fascinating to see after IMF agreed to $147 billion bailout for Greece; market has failed to give its vote of confidence and Greece 10 year government bond yields(11.14%) did not fall as many expected. Please note Ireland is in the same boat, Ireland 10 year government bond yield is 6.50% , I was thinking which one would be the next Greece?

GDP (purchasing power parity):
$232.6 billion (2009 est.)
country comparison to the world: 50
$239.1 billion (2008 est.)
$239.1 billion (2007 est.)
note: data are in 2009 US dollars

GDP (official exchange rate):
$227.9 billion (2009 est.)

GDP - real growth rate:
-2.7% (2009 est.)
country comparison to the world: 160
0% (2008 est.)
1.9% (2007 est.)

GDP - per capita (PPP):
$21,700 (2009 est.)
country comparison to the world: 56
$22,400 (2008 est.)
$22,500 (2007 est.)
note: data are in 2009 US dollars

GDP - composition by sector:
agriculture: 2.7%
industry: 23%
services: 74.3% (2009 est.)

Labor force:
5.583 million (2009 est.)
country comparison to the world: 66

Labor force - by occupation:
agriculture: 10%
industry: 30%
services: 60% (2007 est.)

Unemployment rate:
9.5% (2009 est.)
country comparison to the world: 114
7.6% (2008 est.)

Population below poverty line:
18% (2006)

Household income or consumption by percentage share:
lowest 10%: 3.1%
highest 10%: 28.4% (1995 est.)

Distribution of family income - Gini index:
38.5 (2007)
country comparison to the world: 72
35.6 (1995)

Investment (gross fixed):
19.1% of GDP (2009 est.)
country comparison to the world: 103

revenues: $94.87 billion
expenditures: $116.4 billion (2009 est.)

Public debt:
76.9% of GDP (2009 est.)
country comparison to the world: 17
66.3% of GDP (2008 est.)

Sunday, September 26, 2010

James Chanos on Chinese Economy

James Chanos interview with CNBC

James S. Chanos is the founder Kynikos Associates LP. He manages $6.7 billion. He is one of the top 5 bears in the US. He is famous in holding his short positions for very long period. He made a name by shorting Enron in 2000. Obviously he talks his book; he has have so many interviews all over the media in last couple months on Chinese housing market. China has taken some preventing action to stop the bubble from bursting they hope by tightening the lending standard for second homes and their own version of bank stress test they could have soft landing, lets hope they get it right. If Chanos is right and Chinese economy tanks; we are in a big trouble. What would happen to the US treasury if China stops to buy them? What would happen to the US dollar? I don't even what to think about it. I hope we would not see it happens in our lifetime.

His fundamental analysis on Chinese real estate makes sense to me. Since June 2009 I have been thinking to short them, but technical look very strong therefore I'm going to hold until I see weakness in charts.

Saturday, September 25, 2010

Alan Greenspan Interview with PBS

Alan Greenspan believes we must let the Bush tax cut expire.

I'm not a big fan of Greenspan but he has a point.

Friday, September 24, 2010

Market rallied hard in face of bad news!

Sales of new homes had their second-worst month on record in August. The Commerce Department says new homes sales were down by 29% from the same month a year earlier. It revised up from 276,000 to 288,000 signaling that the housing market remains a severe weak spot for the economy. It was 7k units below expectations at 288k annualized but the prior month was revised up by 12k to 288k. The level is just a touch off the May level of 282k which was the lowest since at least 1963. The absolute number of homes for sale fell by 3k to 206k, the lowest since 1968.
source:Yahoo Finance

The cost to insure Ireland’s debt climbed to a record, leading a surge in European sovereign credit-default swaps, on concern Anglo Irish Bank Corp. won’t pay back bondholders in full. Contracts on Ireland jumped 23 basis points to 487 basis points at 12:50 p.m. in London, according to data provider CMA. Swaps on subordinated debt of Anglo Irish, which was nationalized last year, now cost 5 million euros ($6.7 million) in advance and 500,000 euros annually to insure 10 million euros of debt for five years.

The Commerce Department said durable goods orders dropped 1.3% after a revised 0.7% increase in July. Markets had expected orders to fall 1.0% from a previously reported 0.4% gain. The decline last month reflected a 40.2% plunge in non-defense aircraft orders after a 69.1% surge in July.
If you are scratching your head and asking yourself this is not good news why markets shoot up? You are not alone. That's why we call stock market casino, it's a different species, it does not care what economics data says on the short run. The only explanation could be weekly option expiration, there is a good chance that big institutions sold lots of weekly put options therefore they bought futures overnight to cause a short squeeze in opening to protect their positions. For those who are not familiar with derivatives I need to explain when an option contract does not hit the strike price by expiration day it become worthless and option seller collect 100% premium.
I would not base by trade on one day action therefore I would not make any changes in my positions. Please note if S&P500 stays above 1131 by Tuesday you have no business to be bearish.

Thursday, September 23, 2010

S&P500 Technical Analysis (09/23/2010)

It seams my first scenario is coming to play(to see the article click here), S&P500 broke the 1131 support level. It's critical for S&P500 to get back above 1131. If S&P500 stays below 1131 for a couple days; it would signal more sell-off in coming days. As I explained in my previous post, if this is a real rally big institutions must step in and buy on heavy volume, otherwise what we witnessed in last couple days was short squeeze, not a real rally. Please note as long as S&P500 stays above 1100; we have a good chance to move higher. We rallied 9.6% in 3 weeks, therefore 3-4% pull back is normal.
At this point I'm not sure if this is a pullback or we are rolling over, therefore I recommend to play safe and lock profits.


Related Topics:
S&P500 Technical Analysis (09/19/2010) :

Monday, September 20, 2010

This amazing LOL


Sunday, September 19, 2010

S&P500 Technical Analysis (09/19/2010)

S&P500 Technical Analysis Chart:

Market is extremely overbought; there are 3 scenarios for coming weeks. I will give you all the possibilities and I would tell you which one I think has the biggest potential.

First scenario:
S&P500 would roll over in coming days. It should tank to 1085 or as low as 1075. It’s critical for bulls that 1075 level holds. I think this scenario has the highest probability.

Second scenario:
S&P500 moves above 1131 for a couple days then it gaps open lower this is the last thing bulls want to see in this case S&P500 should tank to 1085 or lower.

Third scenario:
S&P500 grind higher with out any reasonable pull back in this case it could rally to 1170, then rolls over.

On the Elliott wave analysis I could suggest a new set up. There is a good possibility that we did not start the sub-wave (3) yet. Therefore wave (2) could made of the a,b,c pattern. If S&P500 violate 1075 level it means from July to mid-September we were in wave (2). This would be a nightmare for bulls. Because wave (3) is the vicious of 5 waves structure. Please note there is an alternative for wave "C" it could end as high as 1170.I pointed in the chart as [alt-c]. If S&P500 breaks the 1075 it means the (a,b,c) pattern was accurate and the wave (3) should end somewhere between 1010 to 950.

Tuesday, September 14, 2010

Treasury Bond Technical Analysis Part-II (09/14/2010)

iShares Barclays 20+ Year Treasury Bond technical analysis chart:
iShares Barclays 20+ Year Treasury Bond previous forecast(09/03/2010): In my September 3rd post, I mentioned there is a 25% chance that TLT move up to ~105.28 level then we get a pull back. TLT just did that; it rallied to 105.78 and pulled back .Please note as long as the up trend is intact,bulls have the upper hand. Pay attention to 102.7 support level, if it gets violated you have no business to be bullish on bonds. In this case TLT should tank to 98-97 levels. On the upside pay attention to 109.5 level if TLT gets above it bond bears will get squeeze.

Monday, September 13, 2010

S&P500 Bullish Scenario for 4Q 2010

S&P500 Mid-term target: "Click on the chart to zoom in."

I'm a bear as long as S&P500 stays below 1131, but I would like to point a bullish scenario for my bullish readers. The year 2009 has taught us that in this casino(stock market) any thing is possible, therefore I decide to point a very bullish scenario for bulls.

What we have in the chart above is an Inverted Head & Shoulders pattern. This is a very bullish set up. Base on technical analysis if S&P500 gets above 1131 we should witness an extreme rally to 1220 to 1260 by end of 2010 forth quarter. Please note if we get a fake out move above 1131-1150 for a couple days then S&P500 rolls over we would tank to 950 in matter of days.

Sunday, September 12, 2010

S&P500 Technical Analysis Base On The Elliott Wave Theory (Part-4.V)

S&P500 Technical Analysis Chart: "Click on the chart to zoom in."

Next week would be impossible to predict, due to Triple Witching Day. But here is my analysis on market. I hope it helps my readers to make sense of market.

the upper side the channel got hit for the second time. S&P500 broke out the down trend channel (see the chart in blue), which is very bullish. We have to wait to see if S&P500 can take out the 1131 or not? I think it's a fake out not a real thing, but if S&P500 could stay above 1131 shorts will get squeeze and we'll get a strong rally to 1170 in coming weeks.
I was looking for a rally from 1040 to 1090, but S&P500 exceed my forecast by 19 points. I think we already seen the completion of sub-wave "IV" and we should head lower to complete the sub-wave "V". What we need to pay attention in coming weeks would be 1131 level in the upside. If big institutions want to squeeze the shorts and send the market higher they must push the S&P above 1131. If S&P500 falls back into the down trend channel bears would have the upper hand. Please note if S&P500 rolls over and heads lower it could get a bounce from 1075-1066, but if S&P500 stays below 1075 for a couple days GAME OVER for bulls. In this case it should head for 1010 or lower.

Friday, September 10, 2010

LIBOR & Ted Spread Chart (09/10/2010)

I post the LIBOR chart every fridays. Just type Libor in search box (it is located on top left corner). You will see all Libor charts.
LIBOR-OIS (USD SWAP) 3M chart: Value: 0.197

Ted Spread Chart:
Value: 16.034

I post the LIBOR & Ted Spread charts every fridays.

Thursday, September 9, 2010

New Jobless Claims is not accurate (9/9/2010)

New Jobless Claims Table:
Today the New Jobless Claims was 451K. It is not accurate, because 9 states including California and Virginia gave their estimate instead of actual data and the U.S. Bureau of Labor Statistics guessed the new jobless claims data for 7 others states. Oh yes! they made up some number instead of actual data. Their excuse was due to Labor day short week, they were not able to provide the data on time.

Tuesday, September 7, 2010

Interview with Michael Lewis, author of "The Big Short."

I highly recommend my readers to watch this interview.

Michael Lewis, author of "Liars'
Poker," talks with Bloomberg's Erik Schatzker about the subprime mortgage crisis and his new book "The Big Short." The book is a chronicle of four sets of players in the
subprime mortgage market who had the foresight and gumption to short the riskiest mortgage deals: Steve Eisman of FrontPoint, Greg Lippmann at Deutsche Bank, three partners at Cornwall Capital, and Michael Burry of Scion Capital. (Source Bloomberg)

Treasury Bond Technical Analysis

iShares Barclays 20+ Year Treasury Bond technical analysis chart:
Chart above is very clear therefore I make it short. I pointed a up trend channel in the chart, as long as TLT stays in this channel bulls have the upper hand, there is nothing bearish in chart, the up trend channel still is intact, and TLT is above 200 SMA(see the chart in orange color). What you need to pay attention in coming days would be 102.70 support level. It's critical in the short term that TLT stays above this level. At this point I give 30% chance to violation of up trend and move below 101. There is 25% chance it rallies to 105.28 then it could roll over. on the other hand if it gets above 105 and stays above it for a couple days there is 45% chance TLT makes a new high.

Nouriel Roubini on the U.S. economic growth in the third quarter

Friday, September 3, 2010

Market update (09/03/2010)

Ok ! we got the bounce that I was looking for. S&P500 exceed my previous forecast by 25 point. I was looking for a bounce from 1040 to 1090 but it moved to 1105. Note S&P500 has potential to rally higher as long as it stays above 1075, but I'm going to play aggressive. S&P500 from 1100 to 1131 is a good short entry, stop lost at 1140.
If S&P500 stays above 1131 for a couple days you have no business to be bearish. Lets see what's going to play out by next week.