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.

Chart on U.S. Steel (by Mike Paulenoff)

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My intermediate-term pattern work in U.S. Steel (X) argues strongly that last week's low at 51.33 ended the correction off of the January 3 high at 61.18. If proven accurate, that means the price structure held the top of its 8-month rounded base-like accumulation pattern ahead of another powerful upleg.

Notwithstanding the intense volatility exhibited by X on a regular basis, my near-term work also indicates that the upmove off of last week's low at 51.33 exhibits the requisite form indigenous to the start of a new upleg.

With the foregoing in mind, I will remain long X unless and until 51.33 is violated, otherwise looking for a new upleg that propels prices to new post-July highs above 61.18 towards 65.00.

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Originally published on MPTrader.com.

Food Inflation- More Than Meets the Eye (by BKudla)

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As the mainstream public and media starts grasping the significance of rising food prices around  the world, their focus, and the focus of most people is on how terrible it is for poor people or for poor countries, but this is problem is more insidious, and damaging for our economy.

Taking a step back, one of the goals of the Fed is to force velocity of money by raising prices, especially necessities, thus creating the whirlwind of economic activity that can be taxed and diverted to the bankers.  In their mind they solve two problems in one for themselves, and cause some inconvenience along the way for masses.

But we are not in a demand push inflation, but a cost push variety with no increase in domestic income, but more importantly, they are neglecting Maslows laws of well being; specifically when people start to worry about food security and in our case ability to pay for food, a multiplier effect takes hold; in the wrong direction.  People shut down when pursuing safety.

In my view food, and for purpose of this post, is non prepared grocery food, and it is low margin and low velocity.  As prices in the market go up, and wages do not, the first effect is rolling down from restaurant eating, then the high margin prepared foods in the market are target-ted.  This brings us to today, going forward the next roll down is from discretionary food items, and label brands to basics and store brands.

Now it gets interesting, as food and fuel push up from here, the next area is distretionary other spending, which rips into the heart of our service economy, margin squeezes on everything not essential will happen first, then these businesses will simply give up and close. 

My point is as people focus on basics, and worrying about the future cost of said basics, they are less likely to have the animal spirits to create the velocity the FED desires, buying food instead of something else is not simply a one for one substitution of expense in the family budget, and replacing high margin spending with low margin ones, does not drive us out of this ditch, it perpetuates it.

It is ironic to me that every business in this country either becomes a non profit or extinct, so the bankers can be made whole.  Where is the CEO outcry?

Time Saver

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In the interest of saving Slopers' valuable time – always a priority here – allow me to spare you investing your minutes in a couple of big events taking place over the next twenty-four hours. Below are what you will hear, in summary form:

State of the Union Address: "Since I took over, things have improved a lot, but they could improve even more if you back me on my legislative agenda. (thunderous applause)"

Statement of the Federal Reserve: "The economy is getting better, but it could improve even more, so we're going to continue pouring hundreds of billions of dollars into the markets as long as we need to do so, and we're going to keep an eye on things to figure out if there are more hundreds of billions of dollars needed. There was no dissent."

You're welcome.

Loan Loss Reserves – A Comparison (by Runedge)

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Rather interesting when you compare the Loan Loss Reserves as a % of Total Loans and Leases for C, BAC, JPM, WFC.

For the most part C, BAC, JPM are reserving roughly the same amount (4-5% for BAC and JPM and 6% for C). Wells on the other hand leads us to believe they have far higher quality credits on their balance sheet with reserves in the 3% range.  Not sure why that is.  For WFC to reserve relative to BAC and JPM they would need to add about 15 billion or in other words, they are more prone to balance sheet risk assuming their credit quality is similar to their competitors.

Based on some recent litigation regarding put back requests, it is arguable that BAC and JPM are under reserved as well and should be reserved more in the range of C.  Taking it one step further, does anyone honestly believe any of these reserves are based on the reality of a double dip in housing prices that has been ongoing for about four months now?  What about second tier credit quality?  What about the risk of mortgage cram downs?  What about the risk of increased strategic defaults in the face of the longest duration of unemployment ever?  

Balance sheet risk could very well be the theme of 2011 bank earnings. 

Submitted by Runedge.  If you would like to follow my blog please visit - Ultra Trading

Anyone for Calamari? (by Springheel Jack)

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Lots of charts today as it has been very interesting overnight. First though I saw a lovely chart yesterday which I thought I'd share with everyone and it is the daily chart for everyone's favorite vampire squid Goldman Sachs.

It's a beauty, a failure at long term resistance, a broken rising wedge and negative divergence on RSI and MACD. Furthermore there's a broadening descending wedge in red dotted red line that suggests that the next serious downswing may see GS break 100. Strong resistance is slightly below $175 so the risk/reward on the trade looks pretty good, and they may in any case rise with the market over the rest of the week to a better entry level:

Everyone knew what was going to happen next at the close yesterday at the high, after the breaks of declining resistance on ES and NQ, but the very bullish short term scenario didn't deliver overnight and looks unlikely to deliver today. The rot set in first with copper, which broke the strong recent (wedge) support trendline and then gave up most of the gains in recent days overnight. A break of 422 should take copper to 415 if we see that:

I stayed up late waiting for the NQ rectangle to break up so I could enter long with a target at 2331, but it didn't break up, and after pulling back significantly overnight the next obvious target is the rectangle bottom at 2267. Rectangles are (69%) bullish patterns so that support should hold:

On ES rising support from the low was broken overnight and the next obvious target is the second retest of yesterday's broken declining trendline. If that breaks then there is strong support in the 1273.5-5 area, and below that there is the lower trendline of the main daily rising wedge at 1264:

Oil fell overnight to hit my target at the lower trendline of the five month rising channel. It's showing some signs that it may break through it, in which case I'd expect a move below 85:

What was really interesting overnight though was that EURUSD broke the support trendline from 1.30. This opens the way for a serious retracement which could give the short side a strong edge today. EURUSD has been the despair of the shorts in recent days though and could trade around the broken trendline for a while:

GBPUSD also broke rising support overnight and crashed over 200 pips on the news that the latest GDP figures show that the UK economy contracted 0.5% in the last quarter. I've no idea why this should cause such a fuss as this seems a natural transition from the jobless recovery in the developed world, to the jobless and growthless recovery in the developed world. The UK has moved earlier than most in trying to restrain wild government spending to s(t)imulate growth, and others will follow in due course IMO, but in the meantime GBPUSD is building a bear flag and I'm expecting more weakness:

This might yet turn around, but the immediate picture looks bearish, and I'm expecting to see weakness today. If that develops momentum there is a significant risk of a trend down day.

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