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.

Merry Christmas! (by Molecool)

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That's right – I revel in being politically incorrect. It's almost Christmas on my calendar and I enjoy responding to 'Happy Holidays' wishes with a Clint Eastwood sneer and a stubborn 'Merry Christmas to you too!'. Anyway, after being pounded by a six day series of rainstorms the heavens suddenly opened up yesterday afternoon to bestow Los Angeles with a beautiful Christmas present:

Contrast that gorgeous view with the nasty weather Europe is having to put up with right now and you understand why I moved my Teutonic butt to California almost two decades ago. As much as I cherish the Christmas season – I can assure you that winters in Europe (as on the U.S. East Coast) are no laughing matter. You just can't beat the weather down here in Southern California.

The smoothed version of the daily Zero has breached that lower support line and is now clearly pointing down. A signal like this usually suggests that some kind of reversal is on the horizon, but if we're objective here the signal has been in the negative for a while now. So, it'll better happen when it's supposed to happen – which is usually in the first two weeks of January. Let's wait for that and then revisit this chart to see if it's supportive.

You may remember my spiral calendar chart which I pull out of my head every once in a while. If you don't know what this means then just use the search box on your right with the keyword 'spiral calendar'.

Another reason why we may be heading into some type of correction are two major cycle intervals – one being a F21 (i.e. 3090 days) and the other one being an F17 (i.e. 1180 days) – shown on my SPY chart above. In terms of sheer seasonality and given the current bullish exuberance exhibited by the longs the overall market conditions do support a drop. Why a drop? Well, we have been melting up forever so a turn date for the longs would not make any sense. Of course we have seen cycle dates come and go before – granted, none of them was above F20 and as far as I understand it the longer term cycle dates do carry a bit more weight. So I'd give this one much higher odds than any of the dates I've shown here previously.

Alright – one more before I hit the eggnog. I'm sure many of you are familiar with the concept of average true range (ATR). If not do a google search or just believe me that it's an important measure of volatility. And while we've seen volatility on the (un-smoothed) daily Zero increase it's been dropping like a rock on the nominal side of things. When the longs get that complacent and everyone expects stocks to keep taking the express elevator up bad things usually happen. Case in point – take a peak at similar readings last January and then again in April. Of course what's also apparent from these prior readings is how long things can stretch out. So, we may have to wait while equities paint a blow off top before we'll see a meaningful drop. Given the onslaught of POMO auctions scheduled for the next few weeks I would not be surprised to see exuberance get completely out of hand.

Mmmh – actually that ATR observation got me thinking. How difficult would it be to slap an ATR on the daily Zero?

UPDATE: Well, I decided to get off the eggnog and hack together my first draft of the proposed ZeroATR:

Not so shabby – is it? I can probably fiddle with this a bit more but it looks pretty valuable to me. I'm going to slap it on the hourly and ZL as well and see what happens. Stay tuned on that end 😉

Wishing all of you Slopers a very Merry Christmas and a happy new year!!

Alright, here's your f*cking Christmas card – now go away.

Cheers,

Mole

Is This Isn’t a Top, There Will Never BE a Top

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I love newspapers. I don't know where I'd be without my New York Times every day.

But there's no worse newspaper, in my experience, than USA Today. It put the "ban" in "banal". During the rare instances that I travel, it's the newspaper that lands on the door to my hotel room, and even then I don't bother reading it.

So I otherwise wouldn't have been aware of its front page today, but a thoughtful Sloper sent it to me:

1117-usatoday

Yep, that's right. Wall Street is telling you to Get Back Into STOCKS. And you'll be getting them at sensational bargains, to boot!

I'll close by asking the USA Today Marketing Department – – of all the Cohens you had to choose from for this article, did you really have to land on Abby Joseph? She's like eye candy for masochists.

Complacent, They Are

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There's a lot of chatter lately about how boring the market is. I'm inclined to agree. Just take a look at the VIX over the past couple of years. We've gone from The World Is Ending Now (VIX approaching triple-digits) to Everything Is Peaches 'n' Cream (VIX approaching historic lows).

1209-vix

For my own trading day……..I got out of my CYH short early on with a profit (I am flabbergasted at how it's zoomed since then, but I'm glad not to be part of it). The big wrench thrown in my day was my BEC short, which lurched hugely higher this morning. That one position (out of 75) represents the difference between a losing day and a winning day for me today.

As always, individual equities usually account for only about 0.5% of my portfolio, or less, so it's not devastating, but any short that opens nearly 30% higher is going to put gloom on the day.

In any case, I'm busying myself with other things since the blog and market are so quiet now.

The Fog of War

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It seems to me the mass of humanity seems wisest only when disaster has recently struck. After the dot-com crash, everyone – and I mean everyone – clucked their tongues, shook their heads, and took on a bemused grin at the silly souls of 1999 who bid worthless stocks up to heaven. "What were they thinking? How could they believe those p/e's? I never would have done that!"

But then a new bubble started – the housing bubble. And it all made sense at the time. They aren't making any more land, after all, are they? And housing prices have never gone down. Interest rates are really low, and you've got a lot of first-time homeowners coming on the scene. I mean, it all makes sense.

So the the entire financial world is pushed to the brink (and only Lehman was allowed its own natural death; everyone else was artificially saved), and here again, everyone gets Instantly Wise. It's so obvious now how fraudulent and inflated it was, isn't it? Of course.

But we're in fog-land again. From Jim Cramer on up, everyone has figured out that it's silly to ignore the obvious reasons the market is going up. Don't fight the Fed, right? I mean, the writing's on the wall! Bernanke has made it crystal clear. It all makes so much sense.

And yet, whenever the next big fall comes – whether it's next week, next year, or five years hence – the Instantly Wise will wonder how on earth we could have deluded ourselves. How could we have missed the fact the Chinese were about to pull the rug out from under us? How could we have assumed hyperinflation wouldn't take place? What were we thinking?

Wait, we're not there yet. We aren't in Wise mode. We're again in the bubble, and only a fool isn't taking advantage of it. Enjoy the ride.

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