Based on my near- and intermediate-term work, the pattern and momentum configuration in the iShares Barclays 20+ Yr Treas Bond ETF (TLT) argue that the price structure hit a spike high this morning at 109.50, reflecting the flight to safety surge in buying of US Treasury paper despite the puny yields.
While this morning's high might represent the first of multiple "high-spikes" in the 109-110 area, I am willing to take a small, initial countertrend position long the ProShares UltraShort 20+ Year Treas Bond ETF (TBT). That said, to get preliminary confirmation that a meaningful high in the TLTs has been established, the price structure needs to violate and sustain beneath 107.50.
From a yield perspective, taking a shot at a countertrend position in the TBT's has technical justification. The most recent round of ugly U.S. economic data has pressed the 10-year yield to a new multi-month low at 2.42%, which satisfies the measured downside target off of the 10-month top pattern that broke down at the beginning of July 2010.
Originally published on MPTrader.com.
My favorite current short is XRT. I'm not in deep, but hope to be soon.
Fundamentally, we all know the consumer is dead or
dying. I have historically liked XRT
over RTH as I prefer not to have almost 50% of an ETF in 4 names (WMT, HD, TGT,
LOW). In my opinion, the whole “Wal-Mart
destination” play in 08 kept RTH afloat longer than it should have been.
Retail should have been taken out behind the woodshed by
now, but for the mysteries of the market (see also QE, HFT, and who knows what else),
had actually climbed to a new high this past spring. I made a decent chunk of change when the
rubber band had stretched that far north, covered relatively quickly, and have
been watching it ever since. As of
today, it finished bouncing off the underside of the cloud (on declining volume):
It appears to be breaking down:
The MAs appear weak; with the 50 looking to be on a
collision course with the 200 soon:
Short term hops aside, I see initial support at about $34.50
(given the timeframe, this could
coincide with the rising 400dMA). If
that breaks, I’ll be doubling down for the ride to the high $20s.
mmTesla said in response to a question at slopeofhope.com
yesterday that ‘the economy is not the market’. Very true. That doesn’t
mean that they’re not intertwined in the longer term, but in the short
term it does mean that the economy is of limited relevance to the
market. I take an almost purely technical view of the markets, and try
to put my personal (very bearish over the next five or six years) view
of the economy aside, as I don’t think it matters much in the short or
even medium term, and I’m very keen to avoid the easy trap of looking
for evidence to fit my view, rather than forming my view from objective
assessment of the evidence.
That does mean that my strongest views on market probabilities are over a
short timeframe, and I’ll switch my medium term projections without
hesitation or embarassment if circumstances change and major lines in
the sand are crossed. That’s as it should be in my view. Anyone looking
for bold projections that never change much regardless of the evidence
can always sign up at EWI, and the best of luck with that. Tim Knight’s
views are longer term I know, but there are very few chartists tracking a
wider range of individual stocks than Tim, so his view is much broader
than mine or indeed anyone who mainly specialises in the main indices.
In the short term I’m seeing intact declining channels on ES and EURUSD,
and I’m expecting to see a short term low today on ES with the highest
probability target area on ES in the 1033 – 1040 ES area. I’ll be going
long there, though with a degree of caution, as this looks like a
counter-trend play to me, and it is possible that ES could go lower. I’m
very aware that below my target area there is little support until we
retest the July low, but I’m expecting both of my ES channels to provide
On EURUSD I have a declining channel as well, though the upper trendline
was being tested hard overnight and on the 60min chart I am seeing
strong positive divergence on RSI and MACD. EURUSD has fallen back
somewhat since I did the chart, but I’ll be happier when it falls back
below 1.264, breaking very short term support:
Pug‘s primary count here is
still the bullish count until 1037 SPX is broken, which may or may not
happen on this short term swing down, and many would regard him as a
bull here while I am a bear. The more complex reality is in the
timeframe of course.
In truth Pug and I simply have different views over the depth of the
retracement of the March 2009 to April 2010 advance, in that he thinks
at the moment that it is more likely to have bottomed at a 38.2%
retracement, and I think at the moment that it looks more likely to make
a 61.8% retracement (878 SPX), which is also the maximum retracement
that Tim was putting forward as likely in a post last night. All three
of us and many others think that we are likely to see the market bounce
afterwards to a level considerably higher than we are seeing today, and
arguably that makes all of us bulls on that longer timeframe.
In my view these labels are largely meaningless. Our only concern should be to stay on the right side of the market whichever side that might be. Anyone who thinks otherwise should probably avoid trading IMO.
Pug could yet be right. I switched my view back when EURUSD broke
support, as that for me is a very key indicator. EURUSD tends to form
wedges and they usually play out to target. The question here is which
of the two wedges that formed on EURUSD since last November will fail?
I’m leaning strongly towards the more recent bearish broadening
ascending wedge playing out, because of the supportive H&S that
formed at the recent top, and the increasing strength of the overall
bearish technical picture. Here are both of those wedges on the EURUSD
It could go the other way of course, my daily chart of SPX looks
extremely bearish, but I’m sure everyone can see the huge potential IHS
building on it with the neckline at the June and August highs. As far as
I’m aware I’m the first one who pointed it out as a possibility in July
and it is still a possibility. If we were to rise from here and break
the upper trendline of the main SPX declining channel in the 1110 area,
it would be a possibility to again consider very seriously
Something else to note on this chart is the patterns that have formed on
the daily RSI and MACD. I posted this chart the other day and you can
see that we are coming close to reaching the support trendlines on those
patterns. Those are likely to be hit today or tomorrow morning IMO, and
when they are hit the short term low should be in:
One last chart to leave you with today. On the ES 15min chart we have a
fairly good quality descending triangle. These break down 64% of the
time and Bulkowski ranks them at 5 out of 23 as a pattern, though they
perform best on on upward breakout. Bulkowski’s page on it is here,
and I’d recommend his site to anyone using patterns a lot. I refer to
it often. The site is free and also has an excellent section on
Based on what I'm reading in the news, there seem to be some basic facts that some of my brethren on Earth are unfamiliar with, and I therefore feel it is my duty to shed some light on these matters. Let's begin:
+ If you are waiting for a bus, and a full bus pulls up, and the driver says there is another bus right behind him………there isn't.
+ If you are filling your car at a gas station, and a bedraggled man comes up to you with a gas can, explaining that his car ran out of gas a mile up the road, and he needs a few dollars to get gas for it…….he doesn't really have a car, and he really isn't going to use the cash to buy gas.
+ If a billionaire gets in front of a television camera and says optimistic things about the economy, he doesn't necessarily believe the words coming out of his mouth. He just wants to spur public confidence and try to goose people into buying stuff so that he can increase his own prosperity.
+ If you ask someone in Vegas how their gambling is going, and they tell you they are breaking even…..they are not breaking even. They have, in fact, lost money.
+ And, finally, if the government bribes people into buying houses with a tax credit, and that tax credit has an expiration date, you can rest assured that any latent demand to purchase property is going to get mopped up by that tax credit, and you shouldn't be at all surprised when sales figures plummet once the tax credit is gone.
Are we clear? Good. It seems a few people might have missed that last point in particular.