Saturday, September 26, 2015

Why I Hate Bonds

In 1984 I worked at E.F. Hutton as part of the Commercial Energy Desk with Vonderhiede and Zimmerman. I attended a lecture by an old school CTA named David Johnson who was a brilliant, and highly successful technical analyst and trader, with a large team next door to ours.  It was on rates.

He described an unusual sloping head and shoulders pattern that was breaking the neckline, signaling a long term decline in rates and all that implied. Boy was he right.

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While I am not a big head and shoulders person, it is hard NOT to remember what a key tell that turned out to be on one of the major pivots of all time.

Now take a look at these 10 yr. charts....you tell me.
25 yr.chart

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5 yr.chart
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1 yr chart
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Why I Love WTI

Practicing Elliott Wave asks that we respond to the evidence while keeping an open mind that market patterns are evolutionary and subjective interpretation easily sees what it wants.
  3 yr. chart
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It is easy for me to see 5 waves down. While not on the chart , there was significant RSI positive divergence at the low, with the low reading corresponding to the termination of 3.

Context; 5 of C?
5 yr chart

More Context

25 yr.chart

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My primary count is that we are still working out the consolidation of the $114 initial -A-wave drop.
The alt count is the more bullish obviously.

In either case the risk is massively to the upside.

Shorter term risk is still to the upside.

Support is generally $43ish, with the .618 retrace around $42.25 so 2 or 3 bucks...meanwhile even if you view this pop as corrective with lower lows to come, "c=a" @ nearly $55. 

How to reconcile a bullish crude view with being a bear on equities and bonds is my problem.

Thursday, September 24, 2015

The Big Bear

Here comes the bear market and it's a Griz. Really?
 Most define a bear mkt as a 20% decline lasting 2 mo.s or more. I believe the Dow is leading the way (see OH OH Equities from Aug.12, and Monday Morning Indu Blues from July 27)  
and that will continue as it breaches the -20% mark at 14,680. Not that much below the Aug.24 low of 15,370.

click to enlarge
 
And of course, whether counting the high from May 19 or July 20, it's been 2 months.
So the naming of the bear is coming up fast and it will likely be accompanied by the "moment of recognition".
 You might think that the 'moment"was in late Aug. but I believe most are hoping that was an anomaly to do with China and thin August markets. Head in the sand, relying on the Fed to fix it, averaging down.

The case for why NOT to average down, and why getting liquid is crucial.

The high of 2015 was the end of a Elliott Grand Super Cycle Bull that lasted 119 years.
That Elliott count is explained in the April 2 post The Equities Problem .

In it I close with,  "Of course once the 5th of a 5th is complete, whether 2120 or 2300 , the ensuing collapse will be dramatic and sustained. A retreat to the previous 2009 lows would represent a much more significant pull back than seen before both in terms of percent and real dollars, and pullbacks to the 4th wave of lesser degree are quite common. "

Thats ASSUMING the 4th of a lesser degree is 6600, it could well be  600 from 1974.


 

Note the time the corrections take relative to the preceding bull of similar degree.
Roughly 35%...or 41 years in the case of a 119 year run up.

Whats a potential worst case scenario: pullback to 4th of lesser degree at 600 Dow, and lasting decades. That s why getting liquid is crucial.



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Tuesday, September 22, 2015

SP STILL Only - 9% ...It's Not Too Late.

Just a Reminder.

At - 9% from their highs;

Crude = $134.50
Gold= $1730
Natural Gas = $14.37
Ford = $37

See Sep 9 post and Aug 28 post's
 Still Own Equities?  It's Not Too Late.

Friday, September 18, 2015

Trend Resumes

It was sell the news, and a VIX in the teens was the gift tell.

 click to enlarge
 Note that the 2 wave lasted 23 calender days as did the 4 wave. Equality in time suggests they are of similar degree.

Wave 4 DOES retrace a significantly greater percent of wave 3 than common and some are labeling it a 2nd wave. 

A common Elliott 5th wave measured target is 5=.618 of wave 1 thru 3 or 1856.
Seems kinda modest under the circumstances if it 's making new lows by only 10 points.

Neither wave 1 or 3 extended, so the next leg down could extend, whether a 5 or (3) wave.
Typical extensions are 1.6 x, 2 x, or 3x the preceding wave or 

1.6x =1643
2x= 1548
3x= 1312

Looks like a lot but a relatively modest 20% correction is 1625 and a .382 retrace of 666 to 2032 is 1574.



Thursday, September 17, 2015

Fed Impotence or Guile

Does anybody really think that the structural and demographic drags now present in both the emerging markets and developed markets are going away anytime in the next 5 / 10 years? Overcapacity in everything except cutting edge coders. And I give that 3 years; see www.udacity.com

In any case if the fed does NOT raise, it is basically an admission of impotence since it cannot CUT rates, which would be the action taken if they had room to cut, there is no doubt in my mind.

An institution SO dependent on the illusion of power will HATE to reveal the truth; it is POWERLESS to achieve it's stated goals.

It is possible it has achieved it's UNSTATED goals of transferring vast quantities of wealth to the banks, the people that run them, and that control the fed. So thats been a resounding success.

However politically the jig is about up: See Greece, Spain, Australia, UK, Bernie and the Donald.

If they do raise and the market tanks they have a CRISES to respond to and can acquire more power.

What do you think?

Wednesday, September 9, 2015

SP Classic Fib Points Updated

Ouch I hate it when that happens.
Turns out NOT to be a triangle 4th wave for the SP 500, but a zig zag 4th.
However, this too is presenting classic Fibonacci targets as per the last post;  now it's the .618 retrace of the 3rd wave at 1999 AND at that point the c= .618 of a, 100 pt.s up from the 1899 b wave low  of Sep 1.

 click to enlarge

 And just to repeat Still Own Equities?  It's Not Too Late.




Tuesday, September 8, 2015

SP 500 - Classic Fibonacci Points

When panic and confusion reign Fibonacci points often are the only guidepost. In the end human emotions (as reflected in the mirror of the market) can somehow be measured and forecast by these ratios. Despite state interference.
click to enlarge
Sure looks like a 4th wave.
C=.38 of A
To be expected. The weird thing is the actual fibonacci "NUMBERS" being present. Why that should show up (not the first time either) and what relevance it has, except as fibonacci ratios, I'm not sure.
Dumb Algo's maybe.



Sunday, September 6, 2015

China Gamma

Weekend reading worth investing in; 
If we don’t understand both sides of China’s balance sheet, we understand neither

UH OH ... Michael Pettis explains in the above,

The longer the miracle, the greater the tendency. That’s because in periods of rapid growth, riskier institutions do well. Soon balance sheets across the economy incorporate similar types of risk.
…Over time, this means the entire financial system is built around the same set of optimistic expectations. But when growth slows, balance sheets that did well during expansionary phases will now systematically fall short of expectations, and their disappointing performance will further reinforce the economic deceleration. This is when it suddenly becomes costlier to refinance the gap, and the practice of mismatching assets and liabilities causes debt, not profits, to rise.
 
Thing is China is NOT unique, just take a look at the recent leveraging of US corporations to fund share buy backs. For starters.




Friday, September 4, 2015

Euro Holiday Over

Back to work and school and the Euro is about to get schooled. There is a clear set up for taking out the 104 handle.


Euro 5 Day
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Pretty easy to identify the corrective look of Thu afternoons weak rally. It is structured in an abc and 
cannot even achieve a 50% retrace. Now it is overlapping the previous highs of "a". 
So lower looks highly likely.
Euro 6 mo.

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The recent move off 117 in the above chart, has overlapped the highs of the structure up, as highlighted. That strongly suggests that the structure up is complete and taking out the 108 level will confirm that.
Euro 5 yr
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If the recent abc up from 104 is complete new lows are likely with 98/96 the first fib target zone. 
Who's next?