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.

Key Pattern on S&P 500 Breaks

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In this wedge on the SP500 futures…you can see some overthrows which don’t occur on its cash market brethren. The futures market has probed breakouts to the down side which have consistently failed. Now that the fed must act to prevent the political catastrophe it has created by manipulating the newly created money provided to the large banks and primary dealers into “Risky Assets”, as Mr. BURNanke has said, supposedly “…to generate wealth and spending…” JP Morgan’s and many others off-balance sheet margin calls and, most likely, fraudulent “Hedger” position limit exceptions in Silver, Copper and many other commodities that will be classified as very “Risky Assets” indeed. They threw the world into turmoil…temporarily propped up balance sheets and will create a huge liquidity drain. Price collapses in inflationary assets not squeezing the big bank balance sheets should not do anything to help the situation as all that newly printed money simply goes “POOF”.

Great job Mr. BURNanke….now what are you going to do to try to save JPM & Co? Thinking of raising rates Ben?

for a more detailled look at the above chart click here.

Picking Tops, Fading the Fed, Algebra, Geometry

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(To be read while listening to the old classic Not Fade Away)

What are retail traders' favorite things?  Ok, maybe not algebra and geometry, but we'll save those for this post.  It's been awhile since our last post due to other projects – so a very belated, happy, healthy, and prosperous new year to all!

So what do prosperity, algebra, and geometry have in common?

Well, let's take a look at another old friend, the Emini S&P futures.  So many have written about how we're overbaked, the end is near, the top is in, some indicator is signaling a major selloff, you name it.  But, let's imagine the Fed will continue QE2 and will not letup until they start seeing signs of their intended effect, whatever that may be.

What are their objectives with stock prices?  If you were the Fed, what would you try to accomplish to really prove to the bears and the rest of the world that this rally and market recovery is for real?  Think about who's on the other side of your trades almost every afternoon (other than Market Sniper).

(click to expand)


Let's just say, hypothetically speaking, that the Fed is roughly halfway through its 8-month QE2 program, with four more months left to go until the end of Q2.  Since 11/1/2010, ES has risen from ~1170 to ~1340, a nice 170-point move, pretty much in a gorgeous 45-degree line once non-believers got with the program.

If we're halfway there, if ES continues on pace for the next four months, what would the target be?  Yup, you guessed it: 1510.

Now, let's say just for kicks that the Fed starts running out of steam with the remaining half of QE2 going into Q2.  Let's say it's only 61.8% as effective with its remaining POMO activities, as a rough round number.  What would that target be?  Yup, out of pure coincidence 1445.

You can see we have marked the ES chart with prior S/R levels as very interesting reference points.

Ironically, those who engage in sensitivity analysis are often those who failed corporate sensitivity training.  So finally, let's say shorts really panic and actually start covering.  Since Jackson Hole, ES has risen from 1037 to 1340, a nice 303-point move, with one little non-believer interruption ironically right when the Fed was scheduled to begin its QE2 installments.  Assuming we're halfway there, what would that target be?

Nah, they wouldn't really be trying to break prior ES highs would they?  Nah, it could never happen…

Of course, we're not forecasting or saying ES will hit any of these targets.  It's too preposterous.  Everyone knows QE2 will never work and the ES is doomed.

However, we confess we do not plan on taking macro shorts seriously until we can at least break below the latest S/R level at 1310 for starters.  And, we'll need to see some red volume – especially since they just bought 1310s on a volume increase less than two weeks ago.

Isn't math fun?  We hope you enjoy this context model.  With QE2 and the debt ceiling allegedly scheduled for completion, Q2 will be interesting.

Originally published on

Mixed Signals (by Springheel Jack)

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Friday's close was bad for bears on ES, as it convincingly broke the resistance trendline of the main ES daily rising wedge. This might still be an overthrow, but that would have to be in the context of a major top here, and it seems unlikely that we would see that top four months before the end of QE2.I'm very sorry indeed to lose this trendline, as I was hoping it would help signal that major top as and when it arrives:

Silver has obviously broken up hard, which is bullish, and EURUSD has also broken up, which is bullish. It has reversed for the moment at what would have been the resistance trendline for the recent falling wedge to become a declining channel. However as the wedge overthrew at the low, that's not a trendline that seems likely to hold. I'm expecting a short-term retracement here and then a move to test main declining resistance in the 1.40 area:

I posted the falling wedge on oil breaking up the other day, and it has rallied much of the way to the wedge target. Again, it looks likely to retrace slightly here but after that a move to the wedge target in the 91.60 area seems likely:

So far, so bullish, but equities are still looking weak here. ES looks stronger than NQ, and has continued to make higher highs and higher lows, but is currently back below the support trendline that broke last week:

NQ has been making lower highs and lower lows and is now considerably below the support trendline that broke last week. I'm waiting to see whether it makes a lower low than Friday's low today, and if so, that will look weak:

Copper is the standout indicator here from the ones that I generally watch. It bounced off a main support trendline last week, and has formed a sloppy triangle since. If it breaks up from the triangle, then it too will turn bullish, but key support is just below, and if that breaks then copper will looks very bearish:

All in all it's hard to say which way this is heading, and I'm not leaning either bullish or bearish today. There is definitely some technical weakness on equities here, but this might just be a consolidation.

COT Report Week Ending 2/15 (by Ultra Trading)

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This week's Commitment Of Trader report has a few notable divergences but overall sends a somewhat mixed message on short term market direction.  

Oil V Copper

The past few weeks copper has continued to show far greater strength than oil, setting new highs almost regularly.  Oil appears to be rolling over and then another Middle East country erupts causing a spike, that is subsequently sold off.  I present this chart below to simply show how the two have begun show a larger divergence than normal.

Copper V Commercial Net Positions
A few weeks back commercial net positions had become more net long indicating pending copper weakness, but that trend has changed.  This chart would imply copper will continue to show more strength.  The only note I would add is the chart of copper appears to be forming a top similar to April 2010.  It is also notable that the net short position for commercial is reaching its prior highs.  


Oil V Commercial Net Positions
A pretty large divergence is showing here.  Oil is moving down while commercial net positions are increasingly net short.  This is by far the highest net short position commercial traders have had in over a year.  No real conclusion can be drawn from this chart.


SPX V Commercial Net Positions
Last week I pointed out the growing divergence between these two data points.  It has continued to grow and based purely on the prior correlations would imply pending SPX weakness.
USD V Non Reporting Net Positions
Understanding USD direction has become almost impossible.  In the face of geopolitical tension, the fear trade has not resulted in USD strength as in prior times.  The only notable comment to draw from this chart is it appears non reporting positions are ahead of the price action in the USD.  Since this group of traders is almost always wrong, continued USD weakness is quite possible.  The USD is also setting up for another test of a multi year trend line.


30 Year Treasury V Commercial Net
Commercial net positions have continued their move towards net long implying further treasury weakness (higher yield) which would also support the technicals on the treasury price action of late.



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