Slope of Hope Blog Posts

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Treasuries (TLT) are suggesting that bad things are coming (Goatmug)

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 Here's a quick note as I'm still trying to get back in the swing of things after returning from Disney and the east coast beaches of Florida.

Just as we saw in October of 2008 we are seeing a move in Treasuries that is abnormal.  Buyers of Treasuries in size are typically NOT Mom and Pop (although I bet we have more Moms and Pops in there than 2 years ago).  Bad things happen when lots of people are willing to put their money away for 30 years and receive 3.94% or sock it away in the 10 year for 2.95%. 

This move in treasury rates is not good and I will be watching the bond market for additional signals that confirm this breakout.  This is not a moment to be a hero and take on a bunch of extra risk.  In fact, if we do get some sort of stock market rally, it must be used as a opportunity to unload some long positions.

ScreenHunter_01 Jun. 29 15.25

A further move up in TLT may portend a ride like this –

EVEREST-Drop-goatmug1

Goatmug 

 

 

Bear Markets and Former Leaders (by Facesincabs)

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[Editor's note:   Clicking on the links will transport you to the charts.  You could also save these links and keep an 'inventory' of charts that FiC watches]

Wow, what a nice
surprise today for "da bears"!

When a bear market
gets going, one of things that I do is keep an eye on former leaders at their
key support levels.  For example, let's
take a look at retail because a couple months ago it did not seem like it would
every stop climbing as it neared life time highs.  Notice that retail took out a key level
today.  That suggests to me that there is
more weakness ahead.

 

http://tinyurl.com/27bkarv
(retail)


Snap17


 

The other observation
that I have about today and the end of this quarter is that redemption selling
is back.  Usually the money managers and
institutions are protecting their quarterly profits on a day like today, but
clearly we have another shock event on the charts today and the selling by
institutions is persistent.  With that in
mind, here is a another fallen price leader.

 

http://tinyurl.com/24vtlwd
(real estate)

Snap18

 

Notice the "hole
in the wall" set up on this chart. 
If you are not familiar with this set up you can get a definition and
examples here … http://www.hardrightedge.com/trader.htm.  I expect that we will be seeing this pattern
on many charts after today.

 

That's all I have
time for now.  Good luck to everyone tomorrow.

 

My Day

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As you might guess, I have read virtually no comments over the past few days, so I am very "out of the flow" of things, which bugs me. I really like to read what people are saying and referencing. But a vacation is a vacation, and I'm getting a bit of leisure time.

Well, not exactly. My day began, as it did yesterday, at 5 in the morning, and I ambled down to the lodge to start the trading day. I had something like 25 longs and 48 shorts, and I was lightly positioned (maybe 30% of my portfolio; the rest in cash), and tilted somewhat bearish. I was struck with immediate disappointment when I saw the /ES was down 15 points already. I had really, really hoped the last two days of the quarter would be a bore, much like yesterday, but it was not to be.

What happened today sets us up for either an immediate (and it has to be immediate), hearty bounce, or we crack the neckline we've all been obsessing about for all these weeks. Look at the S&P:

Picture 3
 

If we break the neckline, a measured target would be around 875. At that point, I think the bear fun would be done for many ,many months. It would just be a range-bound grind from then on.

Ironically, it would be drastically better for the bears if we rocketed toward 1125 – – or even 1150 – – before softening up again. This would be a once-in-a-lifetime chance to load up on shorts at amazing prices. Sadly, that opportunity may not come.

The Dow Jones would fall to about 8250 (and I believe it will before October is over) in a similar scenario. The giant question is what will happen tomorrow. What could the Fed pull out of their backside at this point?

Picture 2
 

I have been somewhat hampered – – – but only somewhat – – by my remote location and paucity of computer equipment. To be brutally honest, had I stayed home, my results would probably have been extremely close to what I'm seeing thus far.

As of now, I have 87 short positions and 3 long positions (FXE, RTH, and TLT). Tomorrow is bound to be volatile, since today probably threw a lot of people into spasms. Whether it's up big or down big is unclear. I am shocked how fast the fall is unfolding. The bulls are in a much more pitiful situation than even I imagined.

15 Stocks the Street is Shorting (by Ryan Mallory)

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Here are 15 stocks that the street is continuing to get more and
more bearish on since the beginning of this year. Their short interest
has continued to rapidly increase against their historical norms,
and should be the leaders to the downside in the continued sell-off by
the market.

Quick note on this…7 new names on the list and all the ones from
the previous time this list was posted still remain.

Here are the 15 Stocks the Street is Shorting.

Checkout Ryan's Blog at SharePlanner.com


Your editor here…..I have created a FINVIZ screen for you for Ryan's pics.

http://tinyurl.com/37p4xzj

Breakdown or Bottom of Range?

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What happens for the rest of this week is a big, big deal.

We are at the precipice of a cliff. Or we're simply at the lower part of a very big range. I have no idea what's going to happen next. Looking at index charts, technology looks very vulnerable. Yet the Russell 2000 looks like it could make a big push higher from these levels. Just look at the $SPX:

Picture 1
 

The Powers That Be have an interest in defending 1040, and they've done it again and again. If 1040 breaks, the "obvious" head and shoulders pattern we've been discussing for three months comes into play, and we're looking at a hard fall to around 860 (far below my target of 925, often cited here).

At the moment, my portfolio is up 0.52% while the S&P is down 2.67%. You can imagine how I feel about that. I have 73 short positions and 2 long positions (BP and, much larger, GLD).

Today has been profitable so far, but I'm terribly disappointed, particularly since this end-of-quarter nonsense (risk-reduction on my part) has cheated me out of some substantial profits. Of course, it could have gone the other way, so I'm trying to remind myself of that.

Double Your Pleasure: SHJ + Toshi Observations on ES

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I've been hoping somehow my primary bear scenario might play out with a
rally to 1150 before SPX made the next move down towards 870, but it is
becoming increasingly clear that it simply isn't going to happen. After
reaching an obvious point for a low on Friday morning, the bounce on
Friday afternoon was very weak and we just traded sideways yesterday.
Overnight the range support level was broken very decisively and a test
of the next main support level at 1048 ES in the near future looks
likely.

100629_ES_60min_Ranges

If 1048 ES breaks again, and I think that now looks more than likely,
then the way will be open for the February and May lows to be retested
in the 1033 ES area, and it that level breaks then we will be starting
what I believe will the main event of the bear action this summer, with a
fall to the very important support level at 870.

I was expecting a bit more work to be done on the right
shoulder of the huge head and shoulders pattern on SPX, but we came
close enough I think, and the other two bear patterns on the SPX daily
chart, the rising wedge and the right-angled and ascending broadening
formations, are already sufficiently complete. The target of 870, as
well as being a viable target for all three patterns, was also such a
key support/resistance area in late 2008 and early 2009 that if we get
close to it, it should exert a degree of magnetic pull for a test of
that level:

100629_SPX_Daily_Bear_Scenario

Having said all of this we may well bounce initially
today. EURUSD hit a significant support level overnight & the
RSI on the hourly chart hit a major low:

100629_EURUSD_60min_Declining_Support

GBPUSD continues rising in a strong channel, though it might retrace a
bit today after hitting the top of the channel again yesterday:

100629_GBPUSD_60min_Rising_Channel

I read an argument recently that the only major hard currencies in the world
today were gold, silver, the Canadian and Singapore Dollars and the
Swiss Franc, and I would agree with all of those and also agree that
USD, EUR and JPY are all, on current policies, on the road to ruin. GBP
was too, but the last spendthrift and incompetent socialist government
is a receding memory and the new coalition government seems determined
to steer the UK back onto a sustainable economic and fiscal course over
the next few years.

If equities plunge hard over the summer then GBPUSD may
well test long term support again in the 1.40 area. After that I'm
thinking that GBPUSD might start looking attractive as a longer term
hold, and UK gilts will start to look a considerably better bet than US
treasuries.


Commentary from Tim

Most mornings, if I saw the /ES was down 15 points, I'd be thrilled. Not this time.
It's not because I'm net long. I currently have 25 long positions and 46 short positions, and my only large positions are on the short side (DBA and USO).
But, let's face it, these days I'm usually totally short, and my portfolio is often more than 100% committed. Due to (a) my concerns about a small push to 1100 before a resumption of the fall and (b) end-of-the-quarter conservatism, I am only 39% invested. So even if we fall hard today, I imagine I'll profit only modestly. I don't like that one bit.
I had really been hoping these last two trading days of the quarter would be quiet. I guess not; with the news from China driving futures and the Euro down, today, at least, is going to be a mover.
I've got 190 items in my "Bear Pen", and I'm only going to deploy them individually when I think the risk/reward makes sense. The Euro, however ,can't seem to get off the mat. If it breaks below 1.2141, the prospect for a modest push higher dim considerably.
In any event, I wanted to do a brief post just to let you know where my head was at. Even I'm surprised at how pitiful the bulls have become at putting together even a small rally in the face of this ongoing selloff.
A post from TOSHI that is also time sensitive

Money Flows (by FacesinCabs)

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When money flows out
of the domestic markets it attempts to find other places to rest.  Both bonds and precious metals (gold) have
benefited from that.  Gold has been a
swing opportunity in the last couple of weeks, primarily because the US Dollar
has now had 3 weeks of pullback (as the Euro firmed).

 
(Changing relationship of Gold to the US Dollar)

Snap14

 
(The long run of gold)

Snap15

 

In these charts, it
is worth noting that the relationship between Gold and the US Dollar frequently
changes.  Currently, there is an indirect
relationship between them.  The change in
this relationship is highly correlated to the Euro's direction to the US
Dollar.

 

I would also add here
that the decade long run of gold will eventually run out of steam and correct
itself.  I am in agreement with Tim
Knight on this.  Given the relationship
to the Euro, if the Euro does blow up so does gold (e.g., the current bubble
would burst).  However, until and if that
happens, it is worth noting that other commodities have benefited from the
shift in the Euro and USD.

(Notice pivot and change)

 

Snap16

 

I would summarize
that:

 

– I watch these
relationships on a daily basis to monitor the money flows of the markets.


As money continues to flow out of equities, I look for periods when flows into
gold and bonds.

– A positive Euro
(and a declining US Dollar) remains good for gold longs here.

– Commodities are
benefiting from the rotation out of equities and the weakening US Dollar.



(Editor's note:  This post was submitted over the weekend…here is FIC's comments in the comment section:  just a comment about this post …. I wrote it on Saturday before the
Euro pulled back …

today it looks like gold will take a hit
because the Euro has weakened again … )