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.

Underneath the Trendline

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I really can't stand FOMC days. I feel like I'm walking down a dark alley in a really bad neighborhood, and some bearded, professorial-looking guy with a briefcase is about to leap out of a crevice and mug me.

I am thus pretty light today, having no large positions of any kind, but a wide variety of small ones. I note with interest that the Russell 2000 – – more specifically, the IWM – – was poised to claw its way back to the underbelly of its trendline, and it seemed to do just that earlier today.

0126-IWM

This is my "line in the sand" with respect to the small caps. Piercing this level would negate a pretty long-term trendline and – incredibly – represent a new recovery high. But it hasn't happened yet, and it might not happen.

What we do know is that even though the Fed has absolutely nothing to say (except for the paragraph that I helpfully provided yesterday………was I right about the SOTU, or what?), the entire world will do its utterly predictable heart attack routine at 2:15 EST and will read volumes about the future of the economy with every semi-colon and hyphen in the announcement.

It'll be nice when it's out of the way. Note that I'm going to be on the quiet side today since I'll be dealing with this nonsense.

Gold and Silver Targets (by Springheel Jack)

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NQ closed just over the rectangle yesterday and has kept on moving up overnight. I'm expecting more upside and I have pattern targets of 2333 (rectangle) and (2339) falling wedge on NQ. If NQ was to reach the upper trendline of the broadening top that would require a move to 2400 which looks a very long shot from here and seems unlikely because ES would have to break the main rising wedge on the daily chart:

ES is now close to a new high, and is therefore considerably outperforming NQ of course, as well as many other lead indicator markets such as EEM. ES looks likely to make a new high today and I'm looking for a move to the 1310-1315 SPX level for SPX to touch the top of the rising wedge on the daily chart if SPX makes a new high today

EURUSD followed the support break yesterday with a new high. It has been a widow-maker for shorts recently. Oil also broke support on the five month rising channel, but is now bouncing. In the short term there's a steep falling wedge on oil that has broken up since I did the chart below. Short-term, that's therefore looking bullish, and should bounce a bit here. It's worth noting that the rising wedge target is for a return to the recent high, but there's strong resistance in the 88.3-88.5 area, and I'd expect this bounce to fail there:

I've been looking at gold and silver this morning, and a bounce here for both seems likely. Both have reached significant support levels and have touched support trendlines yesterday. On silver I have a very nice declining channel and two possible H&S patterns forming. We reached the neckline for the first of those possible H&S patterns yesterday:

On gold I have a falling wedge since the most recent high and it looks likely to bounce from the lower trendline which was hit yesterday. It didn't quite make it to my neckline target of 1315 and might yet do that before bouncing. I've sketched in a potential path if the H&S continues to form and then plays out.:

I'm definitely leaning long today. A gap fill looks possible, but after that I'm expecting equities to go up. If ES breaks below 1284 or NQ breaks below 2290 then the short-term bull scenario would look much weaker.

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.