Hello Slopers! First I would like to give a special thanks to Tim for allowing me to contribute to his great site. Been stalking this site for a long time and this will be my first post here so please bear with me.
Now onto business: As for me at the start of the week I was a bear and got caught in that bear trap. However trading long enough, and being caught in those traps before, I immediately got on the other side of the trade.
First for the weekend update, I would like to share some basic charts with you all.
TLT:breaks below hourly logarithmic chart
However VXX holds the 1 hour channel and on Friday it retested support 3x!
Also this week, the Nasdaq 100 has made a higher low while the S&P500 has made a lower low. Is this bullish? Well the Nasdaq 100 back in March 09 make a higher low and led us out, but also keep in mind that this happened in July 2008 where we got a nice countertrend rally, but then crashed into mayhem. Also as of Friday, the Nadaq 100 couldnt close above resistance.
Portugal still looks very ugly breaking below 2003 and 2008 trendline
Stockholm Index similar to Nasdaq 100
Weakness in Iceland
Many FTSE related indices however are showing a lot of strength, some even weekly buy signals. I mentioned last week that some European markets were showing strength and I compiled a quick list of them: ALL Ordinaries Index, AEX INDEX, ESTX 50 PR EUR, FTSE EURO TOP 100, FTSE MIB INDEX, OMEX HELSINKI 25, SMI INDEX. But keep in mind American indices and other European indices are still not flashing weekly buy signals.
The Dow weekly in log has surprisingly worked out to a post from September 3rd,which you can go back to here. And now the update on weekly. (Piercing the trendline might mean more bearish claws to come, however) And on the daily, we are still at resistance.
Next up, S&P Global 1200 chart in weekly log
Daily S&P Barra Value Index
S&P1000, Notice how we failed under very important resistance…..
Russel 2000 obeying its resistance.
Midcap 400 Index similar to S&P 1000
The Global Dow
Next up is the lovely FTSE UK ALL SHARE INDEX. Notice all these CLEAN touches and the fact that its still a secular bear.
The "Down" Transports
FAZ WEEKLY Pinched between MA's
China bear ETF:FXP holds support
CSCO:We are back at major resistance again on Log chart…
If all my money wasn't tied up on shorting bonds, I would definently short this
Notice what happened on the daily on July 22nd, when both trendlines came across, CSCO sold off 22%!!!And then we had shorts covering…but now we are at major resistance again.
Morgan Stanley, the one Zerohedge has been talking about in regards to CDS rising and lot of Asia exposure. Look at this bull trap of Morgan Stanley
Now time to get into my favorite specialtiy for this whole year: BONDS.
First I would like to share with you the chart that has made me very happy this year while the consensus at the beginning of the year was to short bonds. It was one of the few charts that has allowed me to sell at the very top.
Now the 2year treasuries, after double topping breaks below support of the MASSIVE WEDGE.
I have been saying watch this for the longest time and now its beginning to move…
Not only is Bernanke joining us on this trade, but the smart money such as Jim Rogers and Bill Gross who has been wanting to short bonds for the longest time, but their timing was way off. Now you could play this with the DTUS ETF but it doesn't move much similar to UUPT…so although a great trade, since im a greedy pig…Im not shorting this because I prefer 15%+ scalps a week. But some of you may want to….
The 10-year Treasuries:
The 5-year Treasuries
Mini Evil Index holding support….This is the only case that makes me a tiny bit worried holding TMV aside from VXX still holding support as well.
Now look at this… This coincides with the Diamond Target that has been met, and now prices are at a resistance… EACH time this meets, bonds have sold off hard. Coincidence??? I think not. Of course if this breaks out, get ready for the biggest deflation play…(Get scared!) But until then, I am shorting bonds
Some of you might be asking but hey the 2000 area looks like a bottom, and not a top…. Why yes it does look that way from far away, but zoomed in on 2000 guess what happened??? A relatively rare gap down of 23% selloff in BONDS. (Editor's note: I can't say for sure, but I think the contract specifications were simply changed; I don't think bonds dropped 23% overnight).
Summary: I am still bearish biased but as of Oct 4th, the bear trap has made me a short term bull by going "technically" long on TMV. The long end of the curve has a little more risk than the shorter term maturities, but is the only bang for the buck I can get. However what worries me about this position is the price aciton in VXX, FXP, and also the mini Evil index. They both have held support firmly..
Of course, if they all break their supports, I would become even more confident in the current position. However if there is another risk off play, then some people will demand safe havens again and rush into treasuries…thus causing me to admit defeat and sell my position, as well as yelling at myself for trading against the bullish trend for bonds and bearish trend for equities. Remember we still had a head and shoulders top and the dollar is signaling an upwave…The bull trap on Morgan Stanley is also kind of interesting to see how it plays out. Silver and Gold also look ready to fall very soon….
Also when bonds sold off dramatically during the post I showed, I backtested what happened to other asset classes. There was no strong or inverse correlation to anything. All the coincidences that I have added up for bonds, all seem to make me want to short it… But I am also keeping in mind that we are in a bear market, and people will rush into treasuries if we crash in equities.
As for equities, I am not calling a bottom. In fact trading in a countertrend is very risky. My intuition still tells me we need to make another low before we can start calling it a true bottom. However the bear trap last week was a good enough indicator to squeeze the bears for the short term.
Check out my site if you have some time!
