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.

The Looming Something

By -

I read a lot of market and economic commentary from various sites, and the smart ones all seem to agree on a few general things:

(1) All the trillions being dumped into the system will probably eventually result in Something bad happening; what that "something" is remains unknown, although a worldwide currency crisis seems to be a favored choice;

(2) The jobs market remains dead, except for lame-o service jobs, and without the artificial manipulations of the Fed, we'd be looking at a 12% unemployment rate right now;

(3) The stock "market" is a stock market in name only; at this point, it's a bizarre confabulation of the Fed, the big banks, POMO, and HFT computers.

(4) There will come an event that will – probably very quickly – bring forth the unintended consequences of all this unprecedented action, and the Something will be reviled instead of embraced.

But all the important stuff – like when the crisis will happen and what form it will take – is utterly unknown. This makes trying to make money in a market like this both confounding and difficult.

What I've noticed, as a technical analyst, is that the only time this year the market behaved in a sensible fashion is during the few months that Goldman Sachs was under the gun of the government. The moment GS bought themselves out of their troubles, things got weird again, and they've stayed weird ever since.

What scares me is that things were likewise weird in 1999, and they just kept getting weirder. The "shock event" that finally woke people up was Microsoft's earnings warning early in April 2000.

What brought all this to mind for me was my examination of charts last night. There are many, many charts that are simply acting in ways that seem abnormal. It's as if you have spend the past twenty years watching people run headlong into a brick wall. Every time they reach the wall, they smack against it and fall to the ground. And this time, as you're watching people rush toward that wall…..they pass through it and emerge on the other side.

That isn't what you are accustomed to seeing; it doesn't make sense; and yet, those are the facts before your very eyes.

I still am basing my own trading on individual stock charts. I thank my lucky stars that I stopped trading /ES, Forex, and – with only a single exception this entire year – options. That kind of leverage and volatility, particularly with a plunging VIX in the background, smells of disaster.

I again took a close look at my 1937-1942 analog this morning, and I remain convinced it is firmly intact. If there's going to be a drop this month – – and I think there is – – it isn't going to be anything dramatic, if the analog holds. I don't think we'll get anywhere close to the lows of even August, and I certainly don't think we're going to have a hard fall, unless some leading companies start announcing some surprising earnings.

I think a dip this month would line up nicely with:

+ A (very temporary) strengthening of the US dollar

+ A (again, temporary) diminishment in precious metals prices

Were we to get such a move, I would be strongly inclined to exit most of my short positions and, at the right price, get heavily long in the area of precious metals and specific equities (I am presently long 10 positions). Bernanke seems hell-bent on wrecking the dollar, and I would like to align myself with the Fed's insanity.

Here's what concerns me even more (I never said this essay would be heartening): if we do get a dip, and then a subsequent surge in equities, metals, and the Euro – – the analog predicts that the markets would go into an Ungodly Boring state for months until the Shock Event takes place. The shock event in 1940 was Germany's aggression; the shock event in 2011 would be……Something. Again, nobody knows what it is and nobody knows when it will happen.

But it seems that the Something is out there, and until then, the market is going to remain a pretty big pain in the rear.

One final thought – – one of the many Something Doesn't Look Right Here data points before me is all the hoo-haw about suspending foreclosures. I don't have a sympathetic bone in my body for banks, but this nationwide suspension of foreclosures – – based on technical errors in execution by the banks – – seems ridiculous to me. My heart doesn't bleed for people who:

(a) bought a house way beyond their means;

(b) signed a document promising to pay a certain amount of money each month;

(c) blew off their obligations to pay;

(d) are hanging out in the aforementioned house, rent-free, payment-free, and scruples-free

I've said it before, and I'll say it again – – the biggest suckers in the entire country are hard-working people who pay all their bills on time, keep their commitments, and wouldn't dream of not making payments simply because they could get away with it.

People like – say – me.

Because I really do wonder how stupid I can possibly be to be sending in my payment every month when millions have apparently been given free license to steal houses – – or at least live in them for free for God knows how long. People who are honest and do as they pledge appear to be the Fools of the Nation.

Hi. My name is Tim Knight.

So there we have it. Things are really wrong right now, and they'll continue to be wrong for the foreseeable future. I don't like it, and I hope it ends sooner than I fear.

Spring Forth

By -

I know the fastest way to get yelled at is to dare whisper that precious metals will one day actually go down in price. Because – I know, I know – Bernanke, QE2 through QE9, fiat money, and – may God have mercy on us – Old Turkey.

But my Parisian friend Serge sent this fascinating analog between the SPX early this year and the current GLD. It's beautifully rendered and worth a look:

1005-spygld

By God, It’s That Analog Again

By -

OK, fine, I'm obsessed. It's 11 o'clock in the evening, I really should be in bed, but I keep staring at my freshest take on the 1937-1942 analog. Here's my newly-labeled Past:

0927-past

And here's my newly-labeled Present:

0927-present
Some observations:

+ The behavior of the analog from points 0 to 12 is, to me, breathtaking;

+ The behavior from 12 to 17 is still astonishing, but the waves of the Present are more muted than those of the Past; I attribute this to historically unprecedented government intervention. The relationships are still there, but they are somewhat softer.

+ This tells me that point 17 – that is, the high in late April – is not going to be overtaken. S&P 1250 is not going to happen. In fact, if this analog holds, such a figure will not be seen for years.

The big question for me is whether the big drop (circled in red in the Past graph) transpired late in June, or if it still is going to take place. I am not comfortable labeling anything past 17 at this point.

I had said earlier this month that the big drop must have already happened. I'm having second thoughts. I cannot divine how to compare the activity from late April until now with the same chunk of the analog in the late 1930s.

The principal point of this post is to make clear that I am not convinced a drop into the low 900s this year is off the table yet.

Important Analog Update

By -

As regular readers know, my 1937-1942 analog is very important to me, and it is something I have been following carefully for nearly two years now. There have been times when I've wondered if the analog had decoupled from the present, but each time, I find that it is holding fast.

The last time I took a hard look at this analog was back on August 8th, which called for the market to resume its fall shortly. In fact, the fall resumed almost at once, and equities stayed weak pretty much the rest of August. I guess Mark Everett's very nasty email was ill-informed.

But here's where I went wrong……..and it was a big wrong. I thought we were going to get one large down-move (labeled below as from "d" to "e"), but that move had already taken place between June 21 and July 1. We were already in the upswing, and my belief is that we are now at point "h" on the graph below.

0921-pastlongterm
This "recount" is pretty severe, because my expectation was that "e" was going to fall to 925, when in fact it didn't even make it to 1,000. I was positioned aggressively for this supposed fall, but we in fact went from "g" to "h".

Here's a closer look at the late 1930s; again, my view is we are at, or very close to, point h:

0921-pastcloseup

And here is the current market; compare this with the one immediately above to see the analog.

0921-currentcloseup
So let me net it out for you:

+ The bad news for the bears, I believe, is that no "mini-crash" seems to be forthcoming this year.

+ The good news for the bears (and it's small comfort, considering the hit I've taken this month) is that a small drop – less than 100 S&P points, I'd say – is imminent.

+ The good news for the bulls is that, following this aforementioned dip, it looks like we'll rally strongly, approaching the April highs.

Referring back to the first chart, I think that after this big rally, we are going to be in for the World's Most Boring Market Ever for a number of months, after which time some kind of Shock Event (which I've labeled S.E.) takes place. That would be sometime in 2011, although I have no idea when.

Some might think I'm making too much of this analog (I'm sure our buddy Mark Everett would), but the longer this analog continues to nail turning points, the more faith I have in it. My "miscount" (Good God, I sound like an EW'er – ugh) is regrettable, but the fuzziness of the past couple of months made it very hard to be sure where to align the points. I'm pretty confident in my current analysis, and I think the bears are going to enjoy some mild relief in the coming weeks, followed by a hearty rally – – – inspired, probably, by some emergency assistance in late October from Shalom.

Another Analog (by Nathaniel Goodwin)

By -

After reading some great posts on the thoughts of Serge and Pug Thursday, I thought I would throw this analog out there. This one has been in the back of my head for a few months, and is one reason I’ve tried to lighten up a bit on the bearish side. I am not trading off of this or any other analog, just keeping it in the back of my head along with all the others.
 
If this panned out, it would be  like a strung out version of the 1960’s. The pattern we are currently in could take a few years longer than it did in the 60’s. Elliott Wave wise; this is sort of like what I think Pug is projecting. ((We could also be in an X wave right now from the 666 low after a big A-B-C from 2000-2009, and possibly break the 2008 high to conclude the X wave. What could follow is another mess of A-B-C crash-rally-crash (or just painful sideways motion) that could last until 2020-2025)).

 

I believe that Prechter’s P3 then P4 and P5 is actually the quickest and easiest way this whole mess could end up in terms of EWT; unless the A-B-C from 2000-2009 ended the correction, and we are now in a new bull market. To be honest, I think there are better ways for me to spend my time honing my trading skills than worrying about EWT long term. No matter what happens, EWT will find a way to be correct in the end!


  SPX1960s
 
Here is a fun-fact, mom says I was actually conceived sometime in March of 1974, and was born on 10/04/1974, which was the day that awesome bear died.

One theory I have is that  I may need to impregnate a willing female sloper, which could possibly start the beginning of the next and final big sell off. When the slope-love-child is born, we should all probably dump our shorts and go very long for the remainder of our lives.

If any slope-babes between the age of 21 and 52 are interested in the creation of my spawn, please leave your contact information in the comments section below. This offer is also valid for Bloomberg’s Deidre Bolton and CNBC’s Amanda Drury.