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The next few weeks I think will be critical to determine the intermediate direction of the market. The McOsc is extremely overbought. Looking back to Jan 2004, there are four other instances by my count where the MscOsc was this high in a bounce after a serious correction and above the 50MA (highlighted in blue), but still below the recent major highs. Those charts are below with black arrows showing their aftermath. What do you think is probable here?
Although I'll be the first to admit that I'm not quite sure what to do with this information, I wanted to share a chart that illustrates how the Euro and US equities have recently totally detached from one another.
For a long while, these two were so much in lockstep that we might as well have just shut down one of them, since there was no point in having a clone. (Below the black line graph and right scale are for the Euro, and the blue line graph is the ESU2).
Just over the past week or so, these markets have had a nasty argument and parted ways. Regretably for the bears, it seems that strength in the Euro still flows instantly to stocks (witness last Friday's Euro-gasm), but an event like this morning (in which the Euro was down about 2% from Tuesday's pre-holiday close) barely caused the US stock market to even blink.
My bearishness on the Euro is as strong as ever, but I must say, the resilience of US stocks in the face of continuing Euro weakness (which has more than wiped out the entirety of last week's Euro rally) is troubling.
Since the market opened this morning, I've been able to post some incredible gains in my long positions in CMG, NFLX, UA and HD. I actually sold a bit early in Netflix (NFLX) at $77.68 from $70 due partly to my incredible distrust of the stock – only to see it march higher to $80 (which actually doesn't bother me, stocks have the right to move higher or lower once I get out). But I am surprised by the early bullishness in my holdings despite the market weakness.
The one thing I was wasn't planning on this morning though was going short any stock, but mainly my reasoning for doing so is to add a minor hedge to the portfolio, in case things really try to get nasty either today or tomorrow, as we managed to get parabolic, to a degree in the short-term, and could be facing a pullback.
It occurs to me, having watched this favorite clip of mine below, that between Steve Jobs and George Carlin, I must have an abiding affection for overly-slender, profoundly-intelligent guys wearing black tops and sneakers. Enjoy:
SPX closed over the upper daily bollinger band on Friday but has not yet reached my trendline target from Tuesday. That would be at slightly over 1380 this morning. This is a decent probability area to see a reversal and retracement, especially given the NYMO setup I posted on Tuesday: