Daily Archives: September 27, 2010

By God, It’s That Analog Again

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OK, fine, I'm obsessed. It's 11 o'clock in the evening, I really should be in bed, but I keep staring at my freshest take on the 1937-1942 analog. Here's my newly-labeled Past:

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And here's my newly-labeled Present:

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Some observations:

+ The behavior of the analog from points 0 to 12 is, to me, breathtaking;

+ The behavior from 12 to 17 is still astonishing, but the waves of the Present are more muted than those of the Past; I attribute this to historically unprecedented government intervention. The relationships are still there, but they are somewhat softer.

+ This tells me that point 17 – that is, the high in late April – is not going to be overtaken. S&P 1250 is not going to happen. In fact, if this analog holds, such a figure will not be seen for years.

The big question for me is whether the big drop (circled in red in the Past graph) transpired late in June, or if it still is going to take place. I am not comfortable labeling anything past 17 at this point.

I had said earlier this month that the big drop must have already happened. I'm having second thoughts. I cannot divine how to compare the activity from late April until now with the same chunk of the analog in the late 1930s.

The principal point of this post is to make clear that I am not convinced a drop into the low 900s this year is off the table yet.

How to Join in Comments

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I've been using computers for over 30 years, and in after so much time, it's easy to become insensitive to what seems easy and what seems hard when using these machines. Far too often I've heard folks who are lurkers (that is, people who read Slope but don't comment) that they don't know how to get into the comments section. Well, let me break it down for you……

First, look in the upper right corner of your browser. (UPDATE: it's been relocated to just ABOVE comments now; scroll down a bit; you'll see it!) See that red stripe? Click on Create Account:

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A dialog box will appear. Tell the system your first name, last name, email, username, and password. Also make up a screen name. If you are Lindsay Lohan, but you don't want people to know you are here, you can use any screen name at all (LiLo will do nicely), so don't worry about using your real first and last names.

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You'll get an email confirming you used a functioning address. Once you've done that, you can spruce up your account with an avatar or other information about yourself. Click on the Settings button in your now-proud-green (as opposed to shameful-red) bar in the upper right. (UPDATE again, it's just above comments now)

 

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You can click on Profile, Picture, Notifications, Account, and Password to adjust any of those settings. The most important thing is your picture, since a default avatar suggests you are boring and uninteresting, and that certainly isn't the case, is it?

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Lastly………..what's with all the military ranks? Well, those quickly show how (a) active and (b) well-liked a person is on Slope. A person who does a lot of posts and gets a lot of Likes gets a higher rank. When you're just starting out, you won't have any rank at all, but be a little active, and you'll be a commissioned officer in no time!

So join the conversation! It's what makes Slope great.

Charts of the Week – Financials (by Mike Paulenoff)

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One sector to watch in a bullish scenario is the financials, which have lagged in this rally and are due to play catch up. Leading the way has been the Technology Select Sector SPDR (XLK), up 13% from 20.50 to 23.12 in recent weeks. It may be a little extended at the moment for a long trade, while the Financial Select Sector SDPR (XLF) is up just 9.8%. The XLF has huge resistance at 15.00-15.06, but if it can manage to take that out, the financial ETF should accelerate.

Within the financials, Bank of America (BAC) has a lot of potential upside into the 15.20 area if it can claw its way above 14.00/05 from Friday close at 13.60. Conversely, a break below Friday’s low of 13.30 will weaken the pattern, while Thursday’s low of 13.12 would be a sell signal.

JP Morgan (JPM) looks even better than Bank of America, but it has major resistance at 41.20-41.70. If it gets through that 41.70 level, you could make the case it has completed a major W pattern, otherwise known as a double-bottom. With the double bottom at around 35.50, a measured upside follow-through projects to a maximum target of 48.



Originally published on MPTrader.com.

Does Gas Have a Bottom?

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Wow, that subject line really sounds wrong somehow. Anyway. I don't touch UNG anymore, even though it's technically always kind of interesting. I do glance at it daily, however, and I was stunned to see it had fallen – yet again! – to a lifetime low. At this rate, why don't we switch all our energy needs to natural gas? The stuff is getting close to free!

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Withering Heights

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Regular and/or observant readers know that very late in August, I posted – – and subsequently deleted – – a post from Boston Wealth (written by Mortie) with a very bullish take on the market's prospects. In fairness to myself, I genuinely did disagree with the conclusions of the post, but to take a carefully-written piece of work and toss it in the dustbin simply because I disagreed with it was wrong-headed and – with hindsight – a telling warning about the sea-change that was about to take place.

I wrote to Ben of Boston Wealth this morning in the most humble terms, and he graciously accepted my apology. I believe in the words of Desiderata – "As far as possible without surrender be on good terms with all persons." I appreciate forgiveness, particularly when it's warranted like this. Ben promises more posts will be coming in the future, and I shall treat them with the respect they deserve.

There seems to be virtually universal agreement that 1250 is the next stop on the S&P (Gainesville, Georgia notwithstanding), although I still maintain the bulls are going to be sorely disappointed. The confidence – in some cases, smug arrogance – of the bulls can be understood in light of this month's price action:

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Equity rallies based on government manipulation don't strike me as sustainable, and I continue to find, and secure, short positions that I feel are promising. I do have a small number of bullish positions whose charts I genuinely can get behind, but my largest hedge – a very substantial SPY position – was closed this morning and I remain positioned heavily on the short side.