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.

USD Breaks Upwards (by springheel_jack)

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Well, we reached the previous rally high on USD yesterday after three days of strong rises, so that we are in a new wave up looks likely. A small further push upwards this week will give us final confirmation:

100121 USD Daily Rally Closeup

What does this mean for equities? Well judging by the last wave up, it should at least keep a lid on equities while it is ongoing, but it may well do no more than that.

Targets on forex look much clearer than targets on equities though. The weekly fan on GBPUSD suggests that the next target for cable is $1.55 or thereabouts:

100121 GBP Weekly Fan

There is also a clear next target for EURUSD at under $1.38. Depending on news from the Eurozone, channel support there may break and open up the next target at $1.30, but I'm not expecting that to happen soon unless one of the PIIGS has to be bailed out.

100121 EUR Daily Channel

CHFUSD also has a clear target at 93, which is the support intersection of the current declining channel and an older rising channel.

Beyond that there is a rising wedge target at 85 that could just be reached by the end of the USD rally. We'll have to see how well the current declining channel stands up, but the previous falling wedge met target just before the current decline began so maybe:

100121 SFR Monthly Channels and Wedges

So what's the likely target for the USD rally? That's a difficult one to call but I have a likely maximum target that may well be reached on the (very likely IMO) assumprtion that we are in a long term USD bear market.

I have marked up the chart according to the most likely EW count for this long bear market, and by my count we are in the second sub-wave up of the third wave down. They'd better look out below as and when this rally ends of course, but in the short term we could see this rally go much further, and my favorite target for it is at the 78.2% fib retracement of the first subwave of 3 at 86.265.

You can see that there is serious fan resistance there, but that line is also the most obvious target. The second wave of five frequently retraces most of the move of the first, and more than likely that will happen here too.

100121 USD Monthly Fan and EW Count 

 
I was looking hard at this trying to find a credible bullish count for USD, but I couldn't see one. After this rally finishes, we should see the USD decline well below the current bear market low at 70.7, and that will have very far-reaching consequences.

Equity bears had better hope that the inverse correlation between USD and equities continues to break down over the next few months. It has already weakened a lot since the start of this USD rally. If the correlation reverses altogether, the likely fall in USD could be very bearish for equities too, and it is difficult to see how the longer term disintegration of fiat USD can be good for the US. 

What won't reverse though is the inverse correlation between USD and commodities. As USD tumbles in the longer term, commodities will soar, and gold particularly will become ever more credible as a real currency that cannot be debased. Bill Bonner's pair trade of the last decade was to sell Dow & buy gold. From where we are now, that looks a likely winner over the next decade too.

EWI Takes the Gloves Off

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The market has been frustrating a lot of folks, not the least of which our friends at Elliott Wave International. However, they have finally issued their clearest "this is it!" proclamation as of Friday's STU…….

 0116-wave3

Of course, what would STU be without some wiggle room in the text somewhere?

0116-weasal

In other words, "this is what's happening, unless it's not." Joking aside though, I always respect clear projections and declarations. EWI's chief Bob Prechter is no less clear, and his view of a bear market isn't the least bit forgiving. Observe:

0116-WAVEC
Yes, that's a level of about 400 or so on the Dow. I'm not even sure a nuclear apocalypse could produce that kind of result, but there you have it.

So at this point, a number of folks I respect have projections all over the map……..

  • Evil (molecool) is in "hibernation mode";
  • Gary Savage is going for an all-out bull market in gold and silver;
  • Good ol' Tim is still in a grind-it-out bear market mode, but with an ultimate low closer to 6000 than 400!

The handful of longs that I had, I sold on Friday morning. I am 100% short, although 40% of my portfolio is in cash, and I still have used $0 of margin. All the same, a 60% commitment is the highest level I've been at thus far.

Nathaniel Welcomes 2010 (by Nathaniel Goodwin)

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I spent Christmas eve with mom and grandma, sipping mimosas and having a great time. I must have had one too many, 'cause I woke up Christmas day at a truck stop on the Ohio turnpike, about 300 miles from where I live. I was able to hitchhike home right before New-Years, only to find my mom's boyfriend moved into my room. I then spent the weekend setting up my trading station in grandma's room. I wasn't able to pay much attention to the market the last week & 1/2 of 2009, but Monday really got me excited.

Call me stupid, but I started shorting the crap out of the RUT on Monday. Here are a couple of charts of IWM and the RUT. Woohoo, we are making new highs Monday and Tuesday!!!! It really doesn't look that bullish to me though, I'm very comfortable shorting here with loose stops. (Disclaimer, I've been on the wrong side of most trades since July).

RUT

Distribution
  

I know there is a lot of Elliott Wave bashing going on lately, so I haven't posted many EW counts. I usually don't count 1min charts either, but today's count gave me a huge boner right in front of grandma, very embarrassing. If we have a big drop wed or thursday, I'll print this chart out and hang it next to grandma's home-sweet-home cross stitch.

IWM1min
 

One last thing about stops… They are certainly hunting for them, all obvious stops (for bulls and bears) are being hit. I hate saying I have "mental stops" cause that sort of makes me move them up or down, and usually I would have been better off if I just set them and let them be taken out. Right now I'm looking at obvious stops and placing my real stops at an odd % below or above them. A place that may make the "obvious" stop price a place that would become support or resistance in opposite direction. Does that make sense? Maybe I've had one too many mimosas again tonight…

Quote of the Month

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After seeing it mentioned many times in the comments section, I finally bought and started reading Fooled by Randomness, which I am enjoying tremendously. I just finished Section 1 of the book.

As I was reading it last night, a quote on page 126 just about knocked me off my feet (and would have, were it not for the fact I was reading it in bed). It is as follows:

A theory that does not present a set of conditions under which it would be considered wrong would be termed charlatanism – it would be impossible to reject otherwise. Why? Because the astrologist can always find a reason to fit the past event, by saying that Mars was probably in line but not too much so (likewise to me a trader who does not have a point that would make him change his mind is not a trader).

Can you imagine what two words instantly sprang to my mind? They rhyme with "Melliott Crave." Not to say that I've reached any kind of final conclusion personally, but I've got to say again, those words really resonated in a way that I bet a lot of readers here can understand.