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.

Governing Fundamental Principles of Financial Markets (by George)

By -

I have observed that the Non-Farm Payroll economic release
and the FOMC Rate Decision are usually days that mark the end of the prevailing
stock market trend. I believe this is essentially a fundamental, rather than
technical, phenomenon.

The prices of the stock market are related to these five
essential macroeconomic factors: consumers spending and savings, the business
cycle, fiscal policy, and monetary policy. Of these, the market seems to
acknowledge consumer habits and monetary policy to be the most important
factors. The former is represented by payroll data, and later by interest rate
policy. (The weight of two of the ten leading economic indicators, related to
monetary policy, has accounted for 40-60% of the index.)

There is a consensus view of the employment data and the
rate decision, and as the release approaches, the market tends towards the
valuation “justified” by the coming data. This is just like a stock price
rising in anticipation of an earnings announcement. Once the data is released, “sell
the news”—the data becomes fully discounted and the trend towards the next
release, a month or quarter later, begins.

That is one very viable explanation for this trend reversal
phenomenon that occurs consistently in the stock market. That prices did not
reverse after last Friday’s payroll data, and will reverse at or near the Fed
announcement, tells me that the financial markets are currently more concerned
with interest rate policy than the economy. Changes in this policy can create a
change in investor mind-set that governs the next long term stock market trend.

Why is monetary policy so important? It affects the economy
and inflation, and also the supply and demand for investments—bonds versus
stocks. I will end this brief essay with an excerpt from a brilliant and
eye-opening passage, taken from the book, Inside
the House of Money. Read it carefully, and many times, and return to it in
the future:

There is only one true macro
trade, and that’s the price of money. Everything else is a function of the
price of money.

Central
banks control the price of money and drive everything with their central bank
rate. They use monetary policy to get supply and demand moving in the economy
by encouraging people to move out along the risk curve. The risk curve, in
essence, is the credit curve.

There is
really only one central bank and that’s the U.S. Federal Reserve. The Fed sets
the price of money.

In actual
practice, the price of money is not the Fed’s overnight rate, but the interest
rate that corporations use to evaluate investment opportunities. I would argue
that’s the 18-month and two-year interest rate. From there, you move out along
the risk curve to government bonds, corporate bonds, and then to equities. At
the tail end, you have foreign exchange fanning out.

EMC

By -

The longer-term pattern in EMC Corp. (NYSE: EMC) has huge upside potential for a thrust above multi-year resistance at 18.50, which should trigger conservative near-term targets of 20.60 and 21.50. Today’s upmove from 17.87 to 18.45 has the right look of the initiation phase of the thrust above resistance. However, my hourly work is very overbought, which suggests to me that for EMC to continue higher directly from here, it must be the subject of some sort of bullish catalyst. Otherwise, the overbought near-term condition should coincide with the advent of a pullback into the 18.20/00 area prior to the next loop to the upside.

2ledTp0za 

Originally published on MPTrader.com.

Secular Bull Market Confirmed

By -

(Note from Tim: it's quite important you carefully read the final portion of this post.)

All indicators, both technical and fundamentals have just confirmed a secular bull market.

The future has never been clearer to us. Forget every bearish analysis you have ever read – 1937, 2004, 1929…Great grand supercycle bull rally is upon us. Fundamentally the explantion is simple – money printing. Just like Zimbabwe's index went up 2000% when their currency devalued to nothing, the Dow is about to explode to the upside. Cross commodity correlation have also independently confirmed this uptrend. The market is at an inflection point, and the outcome is a burst higher. You will miss out if you are not loaded on the long side, and if you are short you should be very concern. As you can see from our very detailed charting using Prophet 5.0 charting software by Tom Night (contact us if you wish to buy a copy)

20000 Dow Jones 

The inverse head and shoulder pattern has confirmed a secular bull market for at least the next 10 years. We are expecting a push higher as part of Wave C of 3. Fibonacci calculations are expecting at least a DJIA target of 21439 (ie 14150/21439 = 0.66).

We are going all in long!

Bulls and Bears, please post this on as many blogs as you can.

Note to bears, please highlight the rest of this post with your cursor:

We are NOT bullish, but as a contrarion we need to get the message out there that we bears have given up. If we keep telling everyone how bad the market is, Goldman and gang will continue to pump the markets higher. So lets all jump into a bull suit, and spread the bull propaganda! When you see the message above across Bloomberg, CNN, CNBC, etc, our mission is complete and the cataclysmic crash we expect is due.

Full cooperation is required especially from all webmasters (Tony Caldaro, Tim Knight, Guy Lerner, Corey Rosenbloom, Mish Shedlock). Do not forget to change the colour of the font of this section to blend in with the background so that it is completely invisible. If bulls are able to decipher this hidden message, our plan will fail and the Dow could go to 21439 with all the money printing!

Big Picture Review

By -

When one is feeling adrift, as I have been, it can be constructive to take a step back and look at the big picture. I thought I'd use today's post as an opportunity to review some of the general ideas I've put forth about the months ahead.

Nothing has taken place yet to challenge my long-term projection. Early this year, I did a a time analysis of when precisely the top would be, and it yielded the date January 16, 2010. That was a Saturday, so the next trading day – January 19, 2010 – has indeed been the top so far. In fact, the high that day – 1150.45 – was accurate to 99.865% of the target I had laid out fifteen months earlier. So, provided that stop stays intact (for years, actually), I'll remain comfortable with my general outlook.

I did a deeper dive into the whole realm of time analysis back on January 8th, and it suggested a target price of 7,960 on the Dow by July 17, 2010. Let me stop right here and say I think this is outlandish, crazy, and very hard to believe. Such a fall would resemble this:

0227-dow 

The above seems crazy to me. I just can't see it happening, except for something extraordinary like a huge terrorist attack or a cataclysmic revelation in the financial markets. But let me temper my prudence by saying this, and I'm going to put it in bold just to be very clear: the one and only reason I cheated myself out of 2009's gains was because I didn't believe the insane course I plotted out could possibly take place.  Read that again. Maybe a few times. Because it was the worst trading error of my life, and it haunts me every day.

I did the analysis. It wasn't just right, it was breathtakingly right. And I didn't believe it. So I didn't act. And I am poorer for my own self-doubt.

Does that mean the above is guaranteed to happen? What, are you stupid or somethin'? But I am trying – I am really, really trying – to have a little more faith in my own analysis. Maybe I'm actually decent at this. God knows I'm trying my best.

We can modulate the drama of the above chart by recollecting the 2004 analog, offered up more recently. Both scenarios agree that, in a shorter timeframe (say, within the month of March), another bounce is in store, and as I've said repeatedly here, I am going to make a valiant effort to cover my shorts on just such an occasion, as I missed the identical opportunity back on February 5th.

I'll also say that it makes sense to me that the market has stalled here. There was very little to keep the market from recovering from its huge plunge in 2008, but take a look at the past decade. There is a mountain of overhead supply spanning years. I am highly confident the countertrend rally is over.

0227-resist 

 So there we have it. My portfolio – and my psyche – are in better shape than they were last weekend, and I'm actually looking forward to March. Let's keep a close eye on the above parallels, as they may be helpful to us. Have a good Saturday.

The 2004 Analog

By -

This weekend, a Sloper sent me his analysis of the market from the perspective of using 2003/2004 as an analog for 2009/2010. I must say, I found it intriguing (particularly because Gary Savage has also mentioned this analog). Here's a graph he put together comparing the present Dow 30 to the one from six years ago:

0222-compareindu 

And here's a similar pair of graphs for the S&P 500:

0222-comparespx 

I took a look at the Dow myself, and using the above analog, it seems we are approximately at where the green arrow is right now……..

0222-compareclose 

If this analog prevails, the next low would materialize within the next few weeks at a level slightly lower than the prior low (let's call it 9642, just for the heck of it). Let me say right now that, if we get anywhere close to this level, I intend to cover every stinking position I have, while simultaneously shrieking like a little girl. The graph above is 2003/2004, and below is where we're at right now.

0222-comparecurrent 

Where does this fit into my big picture? Does this mean I'm throwing 1937-1942 under the bus? Not at all. Nothing has taken place to do which violates my 1937-1942 analog; it's playing out beautifully so far. I simply think this phase of the market, highlighted in yellow below, might follow the 2003/2004 analog. So it's good to have a greater level of detail when trying to ride the much smaller waves.

0222-context