Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

SPY and the Coming Week (from Arthur)

By -

Hi there, it's my first post on the Slope, thanks to Tim and everyone for your insights.  I figured I would return the favor with a couple of my own ideas.  As far as my thoughts on where we are, here are some charts that I have plotted on the SPY.

Screen shot 2010-02-21 at 10.03.01 PM 

 

Since the beginning of August 2009, we entered a fairly predictable price channel that lost its steam at the end of January 2010 when we broke lower resistance (purple trendline).  Since then, we have seen a retracement two times that, in both cases, has flirted with breaking the upper resistance trendline.  Currently, we are at the second instance (the first being around Feb 3), and if prior experience holds any weight, we may bounce off that resistance in a dramatic effect (as per Feb 4).

Screen shot 2010-02-21 at 10.10.59 PM 

 

I, for one, am in agreement that this market has been overbought and that our current "correction" has been far from such.  We have also seen diminishing volume since the bounce back on Feb 5, which signals the bulls may be running out of steam.

Here are my thoughts on some fundamentals, which I believe will determine whether or not we will continue the uptrend or drop back down.

In my opinion, the market has shaken off bad news recently and pioneered new highs (versus the situation a couple weeks ago when we were dropping amidst good news/earnings).  We had the news that China was tightening policy regarding their banks, which merely dropped us down to lower resistance and subsequently bounced off the same (Feb 12), only to rise to relative new highs.  The second, and more important, news was that the Fed decided to raise the rate at which banks could borrow from them (Feb 18).  This can only mean two things:

1) The Fed, with its unfettered access to information, has analyzed the numbers and believes that we are on the path to full recovery in every sense (bullish).

2) The banks have been rising at a disproportionate level than the other industries have been growing and need to be brought in line with them (bearish).

I am of the opinion that (2) is what is at play.  This seems to correlate with Obama retracting his discourse against high bonuses at banks and such in the previous couple weeks, moving more towards a pragmatic approach from the Fed that levels out the numbers between bank profits amidst a suffering landscape.  I will be looking at the upcoming numbers this week concerning consumer sentiment and housing markets as indicators for directional moves in the markets the next coming days.

Thanks for reading and good luck this week!

The Chinese Factory (by Royal with Cheese)

By -

Bonjour Slopers ! Royal with Cheese here … I'm glad and honored to add my little contribution,or call it my "french touch", to SOH which happens to be the best place on the blogosphere !

Most of you have heard about this big country called China with its population over 1.3 Billion haven't you ? The iphone's that you carry with you,the Nike shoes that you wear come from China, the mouse you click on every five minutes like an addict in order to get to SlopeofHope also comes from China ! You guessed it, this country is more or less the ultimate factory of this god damned planet ! Without further ado let's analyse the chart of the world's biggest factory and compare it to our SPY (The Holy American Empire) !

As you can see in this chart, FXI has produced a golden cross in early May 2009,i.e (the 50 dma crosses above the 200 dma),which is a bullish pattern ! Indeed,FXI has rallied up to $47 until mid November 2009.

CHART_1

Surprisingly, the chart of the SPY or call it US of "A" has produced it's golden cross a little bit later, in mid June 2009. Yep, that's a a bit more than one month after China … Sweet Jesus on a biscuit, is America lagging behind China ??! Anyways,the SPY rallied up to $115 until early January 2010 !

Chart 2

This is where things get a little more interesting…. 

The actual chart of FXI shows a top at $47 in mid November with a death cross,i.e (the 50 dma crosses below the 200 dma), that is lurking ! It goes without saying that it will take a "miracle" for FXI to prevent this death cross from taking place… maybe if it rallies sharply 20%  in the next couples of weeks would this bearish cross be avoided ! I'm sorry to say that,but based on my observations, this death cross is an accident that is about to happen. If you want to know the recent victim of the death cross,you can go check out the chart of the EUR/USD of the last four months if you see what I mean.

If everything goes as i expect them to, then the death cross in FXI could materialize by the end of February. Since the SPY was one month behind FXI in the golden cross,wouldn't it be "logical" to expect the death cross to take form in late March ? If you compare the actual chart of the SPY and the actual FXI.. I think that things look pretty clear to me going forward.

CHART-3

Conclusion: The world's larget factory is showing signs of weakness and I don't think that it bodes well for the S&P 500 . I'm out !

The Simple Lessons We Once Knew (By mmTesla)

By -

The foundation of price movement as we all know lies in
supply and demand. Take the emini, all it is intraday is an auction of who is
willing to buy based on sentiment whatever that may be at the time. We have all
heard of trading ranges, but for the sake of mutual understanding here is an
example:

T1 

That is an intraday example of buyers and sellers carrying
out the auction. Often times you may see a strong move up and consolidation for
a few days then test lower. What is happening? Sellers who bought lower are
selling, when prices fall back often to previous volume points of control or
accumulation areas, it is solely price discovery to see, do we still have
buyers down here? When a trading range breaks, sellers close the cupboards in
the pursuit of a higher price to sell at, shorts begin to cover and as a result
price goes parabolic.

My view of market price is that big buyers buy and later
sell at higher prices, market makers, floor trader and other insiders brutalize
the tape in between these major areas of accumulation and distribution.  Here is an example of something that
may play out this coming week:

T2 

The target, for if this unfolds, is unknown, however sellers
have found that people are willing to buy above 1100, so if they accumulate
they will look for buyers and prices will continue until buyers and sellers
once again hash out price.

Why these areas? Mainly due to the low volume pockets
especially given the much larger volume below where buyers and sellers have
hashed it out and price has moved higher. 
Where do trendlines and other examples of TA come into play?  The trendline is just an
aspect for sellers to decide to distribute and the flipside is buy at support.
Notice when these are broken either supply or demand evaporates and prices
sprints to find either supply to meet demand or vice versa. Re -testing
trendlines, prices have broken above and have now met distribution, they fall
back looking for more buyers, if found the trend continues.

This may seem blatantly obvious as you are reading this,
however I feel it is often overlooked. If you change your perspective of what
your trading, for example, if you view an emini contract as a physical asset and
you see that people are willing to buy at 1110 and we are at 1065 where buyers
and sellers previously hashed out price, then it is something worth buying to
sell to someone willing to pay at a higher price. In order to do this you need
to take a long term bias out of the equation, price isn’t always reflective of
terrible economic conditions, ask yourself, are there buyers willing to buy
higher up given previous price movement? If so, and you are near an area of
accumulation than assume prices will rise and vice versa if we are at extreme
levels and buyers aren’t found and there are areas lower where buyers viewed it
as cheap go short.
That is the essence of mean reversion trading.

T3 

The red line appears to be a place where major distribution
would occur. A few reasons for it is that people who have held through this
mess want their money back and would be taking it. Imagine Microsoft where it
took a very long time for prices to break 30 per share because each time,
millions of people tried getting out near the price they originally paid.  People who held through this aren’t
going to trust the market and will want out if we get there.