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The drop, consolidation, and resumption upward has been seen many times before. Just look at the start of this month (the red circle near the center of the graph). But does the trendline break mean this time it's different? That's the million dollar question.
I'm hanging on to my GDX long position, which is having a good day so far. The yellow tint below is the retracement. I am very impressment with the surge in volume recently. The real question is whether it simply fights its way back up to around 45 and then slips again, or whether it can muscle its way through that entire retracement area and push beyond it - - which would be insanely bullish, given the volume. I'm going to hang up and push the stop higher as we go.
I'm pretty surprised what a lame-o reaction GLD is having to the strength in equities; it looks like the dollar's strength is getting the best of it. So far this morning, equities are strong (The Dow is up well over 100 points, and all my index quotes are green); as you can see below, SPY is kicking GLD's hiney. I'm throwing my GLD long under the bus, at a modest profit from Friday, and I've taken some handsome profits in DIG and SSO. I'm holding on to all fourteen of my lottery longs - - the sixteen in my 401-k are all in the green (the two extra being OIH and GDX, both long as well).
Happy new week to everyone - a week where we kiss September good-bye (well, actually, where we punch it and throw it down the stairwell) and welcome (*sigh*) October.
As you're aware, what lies ahead is really all tied up in what the dollar does. I think the long-term view of EUR/USD points downward, and so in turn I'm going to go full-on bear within the next couple of weeks (at this point, I've only got the upper half of the costume on). The medium-term view of the EUR/USD, shown below, could be construed as mildly bullish, as long as it stays above that line I've drawn.
Taking a closer look, things seem more vulnerable - - just the same as with equities. The market is on a downward tilt (again, short term) so I'm going to be keeping very tight stops on my OIH, DIG, and GLD long positions.
The quality of the comments over the course of the weekend was even higher than usual. If you've got some time to spare and haven't done so, I'd suggest you thumb through the past couple of days' worth of comments; there are some real gems in there.
The number of followers I have on Twitter is so close to 3,000 I'll mention it again - follow me! It's free!
I am paying more attention to the patterns of index charts than I am anecdotes about Jewish holidays, and I'd like to use the $TRAN as an example this morning:
The tricky part is gauging just how high it will go. The cyan and magenta tints in the chart indicate how the push higher could come in either a "medium" or a "large" size (God forbid fast-food-loving America super-sizes it, as it is wont to do).
A run-up into earning seasons...........and a subsequent, honest-to-God, no-messing-around change in direction based upon earnings season (and the realization that, gee, companies have to make money the normal way without government gimmicks) makes sense to me. Slopers seem to be honing in on the October 9-16 area as the apex. I'm sure we'll all be watching. My final thought is - - if VIX were a stock, it sure is starting to look like a "buy".
I was thumbing through my Tim's Trading Tome (volume 1........) and I noticed a printout of this posting from Karl Denninger back early this year. He opines that although he originally believed the S&P would push its way much higher before resuming the tumble, he had changed his mind and decided the S&P would be heading toward 210. Your first instinct was the correct one, Karl.
I made my own "bold prediction" that the S&P would be heading toward 950 (OK, that isn't as bold as calling for 210..........) in the near future, and I still believe that. I hope I am not making too much of my 1937-1942 analog, but that is the market direction which makes the most sense to me, and it calls for something quite different than what a lot of bears are expecting: whereas they are looking for a repeat of last autumn (a terrifying plunge into the abyss), I am anticipating - as I've bored everyone to tears repeating before - a long, slogging, multi-year grind down lower than bottoms not-that-far-beneath where we bottomed in March. No fireworks; no explosions. Just an inexorable, slow grind downward. My kinda market.
Last week was a pivotal one for me. The market changed from indecipherable madness to sensible and predictable. From mid-Wednesday forward, I felt like my old self again - - comfortable placing trades, taking profits, and hanging on to the endless flow of thoughts from the Slope stream. And it's not because we had some mega-crash that saved the day; the Dow was down only 1.15% this week, for Pete's sake - but I was able to make a lot of cash even with that small move downward, and it made up for weeks of pain.
For myself, hanging out in the Slope comment section and staying on top of things is proving to be invaluable. Over the course of time, my brain builds a matrix of coefficients ranging from -1 to +1 for all the regulars on Slope. If one pays attention, they learn whom to completely fade (-1) and whose words are gospel (+1). Of course, all of us fall somewhere in between. But the hive-mind in Slope - - and the sheer quality of the comments and articles shared - - is a miracle, to me, and has become essential to my good trading.
The next two-three weeks are going to prove incredibly interesting and important. Have we made a top, or is another top in store? I'm leaning toward the latter. Giving the bulls one more lollipop in the form of 10,000+ on the Dow would finish setting the trap. I have allocated my positions to take advantage of the anticipated last, desperate lunge higher - - - my IRA account is 100% long now (all lottery plays, and a big OIH position) and I've got a handful of large long positions in my trust account. My options account remains strictly in puts, and I'll augment those positions if/when we climb higher.
Thanks for swinging by, and I'll probably do a post on Sunday.
......and their stops.......
BEE.............. 2.19
CMZ.............. 1.06
CSE............... 3.92
DAC.............. 4.32
EK ................4.60
GA............. 7.18
HERO............. 4.91
MGI.............. 2.70
MPEL.............. 6.69
OPXT............. 2.82
Looking at the somewhat bigger picture, it's evident that if the EUR/USD can hold beneath that red horizontal line, the odds are strong for a drop in equities; this is a monthly graph (I find it is sometimes helpful to get a much cruder granularity of data to rid your eyes of some of the noise).
Generally speaking I am:
Banging our way up to 1120 or so on the S&P, and crossing that magical 10,000 mark on the Dow, would be an amazing bull trap. In the meantime, I'm going to try to bag some bullish profits in select areas. I'm even going to take one final look at my Wrecks watch list for any lottery plays.
