Friday, November 14, 2014

Nothingburger week

Like I said before market open Tuesday morning, we're just marking time up here, waiting for the Bollingers on the daily SPX, VIX, and vol ETFs to come in and give us something to push against.  Pull up any daily chart with a BB overlay, and you'll see them tightening up from above and below.

For a brief moment this week I wondered if we might pop up over the top of the megaphone to the 2080s SPX, but it held.  Bears then got their only real play this week, 16 handles from 2046 back to 2030, but only if they were smart enough to exit.  Puts held since then are bleeding theta daily.

See you next week, hopefully for a violent reaction off 2050 SPX.

FEMA Camp Sol Duc (ONP)
North Cascades bivy at 7600'

98 comments:

Permabear Doomster said...

re: violent reaction off 2050 SPX.

Does a retrace of 3-4% now count as 'violent' ?

Bears look done for MONTHS.

No point short index puts.... no point Long VIX. Seems a complete waste of time.
-
Have a good weekend...

Phat Repat said...

Seems a complete waste of time.

Hopefully not. Money to be made on both sides of this market.

Watching bonds here (TLT my proxy) as someone stated earlier; Bonds or USD, but not both. Resolution cometh.

CG has the right idea; family, great outdoors. Think I'll be doing that and step away from the computer this weekend.

Good weekend all.

Fetal Position said...

You certainly don't sound like a Permabear Doomster. I assume you have backed up the truck, and went long?

Christian Gustafson said...

Our friend and colleague Doomie got banged up on the insane run up from the October lows. Since then he has had quite reasonable doubts about the bearish case going forward.

I refer again to the 2007 top, and the sharp headfake through the 200DMA, and ensuing rally, and new highs, that followed.

Doomster's in that terrible spot, questioning his analysis and surveying the damage. Imagine the pain if he levers up long, and we collapse to 1750 SPX per my crummy chart.

Every bear suffers alone.

The market is his cross to bear.

Fetal Position said...

I'm not sophisticated enough to go short very often. The only time I did was 2007/08, and it was a small amount of SDS. In fact that market was what got me interested in this mess in the first pace. Even with my very limited knowledge at the time, I knew that market was a sham. What was PE on the S&P then?

Christian Gustafson said...

Remember also that Permabear Doomster is in London, so we should also ask what beer he has at his disposal tonight.

Here in Seattle, I am blessed to have Inversion IPA, from Deschutes Brewery of Bend, OR.

I'm concerned that Doomie may be stuck with that warm pub swill I had the last time I was there.

Fetal Position said...

My favorite English beer ever is Yorkshire Stingo from Samuel Smith's. It's a barrel aged strong ale, around 8%. Fullers 1845 is no slouch either. Deschutes is a very consistent brewery, I have some Hop Trip in the fridge now.

Christian Gustafson said...

I'm still shocked by the pics of drunken British women.

Late-Empire follies?

To be fair, though, I myself have ridden the Chicago Elevated passed-out overnight. Criss-crossed the city 3 times. Probably lucky to be alive.

Fetal Position said...

"I'm still shocked by the pics of drunken British women." Children posing as adults, there seems to be a lot of that these days. A good deal of these women are probably divorced, and have young children, that they feed junk food, and ignore half the time.

Bicycle said...
This comment has been removed by the author.
Bicycle said...

Hey it looks like we can finish up this week after all...

Former Chicago Mayor Jane Byrne died a few days ago. Back when Chicago was an interesting place she set up the first cracks in the Chicago machine for Harold Washington to follow up and beat the hell out of it. Plus, she started the Taste of Chicago.

Phat Repat said...

Not sure just yet how the week will finish, but given the action in the Asian markets one would have thought differently. Still early, but for positioning long/short in SPX; I couldn't Buy/Sell the futures at this point. Other play on both sides still functional, however.

With the system I'm using, the Russell could give a short signal, however, if one were so inclined. ;-)

Christian Gustafson said...

Sell 30 April at 142!

Phat Repat said...

CG; 30 April what?

Phat Repat said...

Bah, too late for me and Russell not cooperating. Of course, now that I sign off, all the fun happens. ;-) Leaving it in your capable hands.

Permabear Doomster said...

re: Sell 30 April at 142!
--

Where the hell is beeks?

Bryan Franco said...

Where / who is Luna these days from Denninger? He was good. Probably retired by now if he stuck to his system. Lunatic Fringe.

Phat Repat said...

Of course, Russell (IWM) did give short entry with a price target of 110.95 and a Stop around 117. Up a little after hours so maybe there will be part deux opportunity?

Or perhaps I should stick with the Hang Seng while over here since I'm not the early morning type. ;-)

T.Berry said...

cg, good call on 2050, your 2080 looks good too!

Christian Gustafson said...

Bollingers still out to lunch, still happy to watch this crazy thing play out, and do what it will.

T.Berry said...

doubt i'll sell the oct positions now. this rally could go into next year. looking for record or near record retail xmas sales. cheap gas and records stocks may make for a spendy consumer this year. do think at some point (maybe early jan?)we dip under 2k once more tho

Christian Gustafson said...

Market breadth has been terrible lately; I'll be very interested to see what we put up today.

And keep an eye on the upper daily BB on the SPX, and the bottom BBs on VIX and UVXY.

Fetal Position said...

BPSPX has screamed higher this morning.

Bicycle said...

Update on the pennant and megaphone--we are almost there.

Fetal Position said...

Just curious, what triggers a decline at the top of the megaphone?

Bicycle said...

Nov 19 8:30 AM Housing Starts Oct - 1000K 1025K 1017K -
Nov 19 8:30 AM Building Permits Oct - 1050K 1040K 1031K 1018K
Nov 19 10:30 AM Crude Inventories 11/15 - NA NA -1.735M -
Nov 19 2:00 PM FOMC Minutes 10/29 - - - - -
Nov 20 8:30 AM Initial Claims 11/15 - 285K 285K 290K -
Nov 20 8:30 AM Continuing Claims 11/08 - 2375K 2380K 2392K -
Nov 20 8:30 AM CPI Oct - -0.2% -0.1% 0.1% -
Nov 20 8:30 AM Core CPI Oct - 0.1% 0.1% 0.1% -
Nov 20 10:00 AM Existing Home Sales Oct - 5.10M 5.17M 5.17M -
Nov 20 10:00 AM Philadelphia Fed Nov - 15.0 18.3 20.7 -
Nov 20 10:00 AM Leading Indicators Oct - 0.6% 0.6% 0.8% -
Nov 20 10:30 AM Natural Gas Inventories 11/15 - NA NA NA -

Bicycle said...

...or maybe Netanyahu is gonna go totally nuclear on the Muslims this time. Really that could become a bigger shitshow than ever before.

Think ISIS-backed Hamas...

And they will be trying to draw us into it in all sorts of ways...

Phat Repat said...

I don't know boys, seems the Russell isn't playing along. Is it normally a laggard? Gap fill tomorrow lower and then we'll see.

Even with this strength, some caution flags remain in my system. Positions working fine on SPX so far but looking for a downside entry soon; perhaps even tomorrow. ;-)

Bicycle said...

Hrm.... 6mo Dow chart.

We could be done or we could skate up that trendline all the way through the new year. How confident are we in this turn date tomorrow? If Japan pukes tonight, we could be done.

Christian Gustafson said...

I don't mean to be a broken-record here, but I'm mainly interested in touching the daily BBs on the SPX and VIX.

We are in this thin little wedge here.

We could meet the upper daily Bollinger maybe on Friday at 2066 SPX or so, with the New Moon over the week-end. If we can stay within this thin little wedge, we could conceivably inch up to 2100 by the December 10th Bradley turn.

But I'd much prefer the 12/10 Bradley to be a bottom.

Bryan Franco said...

Seasonality would argue for 12/10 Bradley to be a bottom

Christian Gustafson said...

Agreed, with a bounce into Christmas ... and then?

Well then we would get that EOY sell sell sell panic crash back to the 1200s. But this is all open-mouthed speculation, war-gaming.

Phat Repat said...

EOY would be EOQ which should be constructive, I would think. Unless no longer required for bonuses? I dunno.

IWM still down targeting prior 110.95.

As to current situation, limbo persists or perhaps the pause that refreshes? By the numbers:

Buy/Buy Stop 2062.35/2037.93 T1 2161.89 cluster

Sell/Sell Stop 2028.61/2053.00 T1 1933.99 non-cluster

Tick Tock

T.Berry said...

agree bounce into x-mas & y/e. expecting near or possibly record holiday sales this year. either should produce a nice boost in mkts.

being in for the longterm not seeing anything that would make me want to sell right now. thought briefly when they turned off qe but that would have been a bad move. would have missed the +4.4% move since. targets for '15, snp 2300'ish, dow 20,000+ish, nas 5,300'ish not without a couple 5+% corrections along the way

gl all....

Christian Gustafson said...

Still can't get interested in any positions here -- maybe next Tuesday?

It usually takes a day or two lag after opex to setup any kind of turn. And we need that Bollinger.

VIX is setting up really well, too.

Bicycle said...

We are within spitting range of the top of the megaphone, and so I'd like to see a gap and crap tomorrow, or a shortable spike into the close and LLD in the futes at the end of the weekend.

We will probably just churn away sideways thru the end of the year, tho, amirite? With the holidays approaching, is anyone even trading anymore, except Jonny 5?

Phat Repat said...

And up we go.

IWM stopped out while the SPX, still in limbo, is looking constructive. Numbers...

Buy/Buy Stop 2064.79/2040.33
T1/T2 2155.92/2166.14

Sell/Sell Stop 2031.01/2055.43

Still on both sides of this but would be 'forced' in by 2080 if signal not given before.

Happy trails... Yee Haw Guess it's all them new 5 million citizens that will goose this market. ;-)

Bicycle said...

Well there's our gap up, thanks PBOC.

We have a potential top on the megaphone this morning, but we are going to have to hold it here for something truly ugly next week. LLD Sunday night, market halts through the week and full on panic into the holidays as no bull can escape and no short can cover.

Fetal Position said...

I wish I was better at this. I would just love to know why anyone would be bearish at this point, unless they are driven purely by ideology. I just can't see reason for any major pullback until well into 2015, barring some unforeseen event. Valuations be damned. Believe me, I hate to be the bearer of good news.

Bicycle said...

Top call! Get your top call right here!!

Now let's see some VIOLENT confirmation... please?!

Christian Gustafson said...

SPX daily Bollinger still up at 2079, Bicycle. That's my trigger for a short-entry.

UVXY lower BB has come in at 19 and change.

VIX at chart support.

Phat Repat said...

I can't even imagine what could happen Bicycle that would have such a profound impact to reverse this trend. While anything is possible, I would be more inclined to see this continue than to consider your scenario.

An SPX long entry would be at ~2084, confirmed, for me. Simply amazing. ;-)

Christian Gustafson said...

VIX hasn't collapsed today, and you can see that it very near an important support -- pink line -- and its lower BB.

Phat Repat said...

Something else to consider is the apparent indifference of the bonds. My proxy, TLT, is prepping for a move. I suspect up, with a target of 126.10, and an entry would be permitted after a move above 120.34 (using today's numbers).

Conversely, it would be a short below 118.38 (using today's numbers).

Interesting times... ;-)

Bicycle said...

So even ignoring the megaphone, we are going to just sail through an upper bound trendline that has held now for a whole year?

We gapped up to it and stopped at it... right there... this morning.

If we blow right through it... I agree... Dow 30k here we come. But we are just going to say that a year long trend is not going to show some significant resistance? Where have my bears gone?

We have a perfect setup, a potential top at the upper bound of two large nested megaphones, a huge morning gap up and all we need now is the reversal. It is what we have been waiting for for years. And everyone is afraid it's going to just keep going. It's perfect.

Christian Gustafson said...

Mr. Bicycle, how about we gap down 20+ handles on next Tuesday's Q3 GDP number pre-market?

Bicycle said...

Yes, yes, let's start dumping on fundamentals...

Phat Repat said...

These markets haven't been operating under normal circumstances ever since the CB's have been involved. Which tells us they are bat excrement crazy frightened. Desperate institutions do desperate things.

Not saying this isn't a top, just that I couldn't enter even if we fell away from the top (at least not until confirmation). So for the SPX, that would currently be at 2038.49 for me. To each their own. ;-)

Heck, I hope you're right so I can finally execute instead of playing both sides for a mere 3.5% (on a monthly basis).

Fetal Position said...

I'm waiting for the RUT and DJT to break their former highs. It would be nice to see base metals start cooperating as well. Other than that, and the fact that the VIX chart looks like a Lovecraftian monstrosity, I just can't get excited about a large pullback.

Christian Gustafson said...

Does everyone see the E-D in play here, with the 1-4 wave overlap at SPX 2056?

Good.

Bryan Franco said...

Yes

T.Berry said...

sold half oct positions this morning. hope we get that one last pullback before y/e rally. never was good at timing so it'll probably keep going up :) plan is to buy back that half if we can get near 2k.

gl to all..

T.Berry said...
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T.Berry said...
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T.Berry said...

alredy getting feeling shouldn't have sold half oct position on friday looking at futures. good chance 18k hits this week. if not, then dec being best month of year averaging 1.7% gains will do it.

good luck all this week.

ps. pboc cuts again and 20k will be here before we know it.yikes

Phat Repat said...

The whiff of desperation is becoming a stench. PBOC cuts again and 20K will be the least of our worries.

In fact, that could lead me to completely pull funds as this game could drastically change. I will likely stick to that barbarous relic of old at that point.

Christian Gustafson said...

I gotta say that the Precious sure looks like it's going to bang into overhead resistance and break down hard again.

Excited to see where the daily SPX BB is tomorrow. It was at 2077 on Friday.

And all of the puts bought from the October swoon are gone. Toast.

If the market rolls over now, there are few hedges in place. The reaction will be more selling, IMO.

Phat Repat said...

CG
I welcome the gift of lower precious metals prices. With the coming deluge, last man standing.

T.Berry said...

pboc cut just 25bp and global mkts went crazy up. rates are still above 5.5 so they have room to cut further. any sign of weakness and i wouldn't dare say they wont cut again.

i do believe dow hits 20k but not until later part of '15 that is only a 12% move. nothing out of ordinary or to be concerned about

Christian Gustafson said...

Don't tell anyone, but I'm privately cheering for 2084 SPX today, followed by a cliff-dive into the Abe election, and then EOY.

May the odds be ever in your favor.

Bicycle said...

Whistling past the graveyard...

Fetal Position said...

http://inflationdata.com/articles/2014/11/20/inflation-flat-october/

Sarah Bell said...

Bicycle or Christian

I can't tell - what is the amount of DJI at the very top of the megaphone

Thanks

Bicycle said...

We don't know what the "top" of the megaphone is, yet. The Dow has been as high as 17,894.80, which still keeps us in the megaphone, but we could still put in new all-time-highs above that number, as the top trendline of the megaphone is constantly rising with time. We could ride that trendline up all the way into 2015 at which point we could be over Dow 18,000 and still be in the megaphone.

We need to see some kind of terminal pattern (like another nested megaphone) across the span of the next few weeks or days to A) get confirmation of the validity of the pattern and B) call the top (yet again).

Permabear Doomster said...

CG - Mr. Bicycle, how about we gap down 20+ handles on next Tuesday's Q3 GDP number pre-market?
-

Sp +4pts.

GDP is 'fine'... as much as can be said for any such type of data.
--

We're headed far higher CG.... you're just wasting your time now.

You've become Daneric.

Fetal Position said...

I agree with Perma Doombear, the combination of low interest rates and low oil is creating a "goldilocks" environment for stocks. At least for the time being.

Bicycle said...

We are not headed "far higher" until we break the year old trend we have recently been running up against.

Bicycle said...

The interest rates are low in order to drive the demand to extract the oil which can only be extracted at ever higher and higher prices.

People generally don't realize how doomed we all are right now with zero bound rates and falling oil prices.

There are no instruments left in the tool box to drive enough demand to drive higher oil prices, to drive production of oil at ever more expensive prices.

Production is being shut in.

When this is realized, the panic will set in.

No oil production growth = no credit growth = no growth = conservation policy = deflation

Fetal Position said...

I guess that's the problem I've been having with this argument. High oil prices = doom, low oil prices = doom. I completely agree the rapid fall in oil prices, without any corresponding negative reaction from stocks does seem strange. It would be more encouraging to see the prices firm up a bit.

Christian Gustafson said...

Just when I'm glad that we have a chick on board here with Sarah, Permabear Doomster himself goes all hysterical on us.

Watching the SPX Bollingers, sir. They are still far apart, and we are nowhere near the upper one. Flat and watching for now.

McHugh has a phi mate turn coming up in a bit. His last one was a dud, but his next one could work out nicely.

Great aphorism from Taleb, in his Bed of Procrustes:

"Anyone voicing a forecast or expressing an opinion without something at risk has some element of phoniness. Unless he risks going down with the ship this would be like watching an adventure movie."

So I'm flat now and waiting for the stars to line up for me. When they do, I will short the SPY via put options and pick up a passel of the UVXY.

May I assume that you are loaded up with out-of-the-money SPY calls per your predictions? What strike and expiry do you like here?

Christian Gustafson said...

More wisdom from Taleb.

When we want to do something while unconsciously certain to fail, we seek advice so we can blame someone else for the failure.

A fine read. I should make it required reading here via some sort of browser plug-in.

Fetal Position said...

Bicycle, is that 17,842 at the top of your megaphone?

Bicycle said...

That was just an intraday tick and did not intersect with the top trendline. The most recent intersection with the top trendline was the ATH at 17,894.80, but note that with the ever-increasing slope of the top trendline over time, any future intersection would be another ATH.

Thus my earlier notes about being careful to watch for a terminal pattern. We could simply ride up the underside of that trendline for months, setting a bunch of new ATHs into 2015, but never breaching the resistance.

If we can identify some kind of bear pattern that is bouncing up against that trendline, then we may be able to identify a place to short and even top tick the market.

If you simply short every time we hit that trendline, you may be scaling in your shorts, and you could be taking pain for a while if we continue to ride up the trendline for a while.

If you're looking for a place to exit longs, I don't know what you'd be waiting for. The ramp from October is a magnificent gift for anyone still holding long. I can't understand the justification for going long or holding long at this point--now if we break through resistance, that is a reason to go very long. But why not wait for confirmation? If you are holding long here you're simply gambling you can eek out a bit more juice from the indices and are risking a potential huge, nay, potentially catastrophic amount of downside.

Note that I do not use my own charts to daytrade or place huge short positions, for me it is primarily risk management to have a better idea of how to move myself out of the way of catastrophic downside.

Personally I am deathly afraid of capital controls and increased regulation or outright banning of shorts during the next down cycle. I am sure that fear will cost me plenty of potential gains during the next bear market just as it has cost me gains from the 2009-present bull cycle.

I am however naturally risk-averse per my lineage of survivors of the Great Depression, Scottish and Irish famine, and Eastern European oppression from the Russian Empire--and my intuition, and the social mood, is telling me that on a scale of decades, future people will look back with astonishment that people played the market at all from roughly 2006 - 2020, held any of their money in brokerages (most of which will fail outright), and other things.

Many of the things we take completely for granted will be looked at as great extravagances 20-30 years hence.

I am genetically programmed to expect and gird against an ever encroaching hell that is right around the corner. I expect most resolute bears endure similar levels of mental conflict. Please, listen to your own voices and ask your own questions of yourself and the mess around us. Ours are just guesses, and collectively, we might be able to figure out something very important.

Fetal Position said...

The strangeness continues. The 30yr yield is plummeting.

Bicycle said...

Um... Gold... WTF

RED ALERT ALL BEARS ASSEMBLE

Fetal Position said...

What's up with gold? Copper is about a nickel away from a 52 wk low. The market may rally into 2015, but the economy ain't looking so hot.

Bryan Franco said...

Massive support being taken out in copper. Hopefully this doesnt trap.

Sarah Bell said...

Christian

You are funny. I almost spilled my beer laughing so hard reading that permabear post.

Christian Gustafson said...

Daily SPX upper Bollinger still 10 handles above us at 2078. Of course the big event this week is the OPEC meeting tomorrow.

Oh, and don't forget to vote.

Happy Thanksgiving -- I'm off work through Monday.

T.Berry said...

not a bad nov up 2.5% on snp. coming into dec which is historically best month of the year. if snp performs average (1.7up) should finish '14 around 2100+. still not seeing any reason to hit sell button. look for continue melt up well into '15 and good chance into '16 at least up till elections.
a safe & happy holiday to all...

T.Berry said...

ps. expecting a huge holiday shopping season. possible record year thanks to cheap gas and record stocks.

Bicycle said...

OPEC just called the top. Flush it. Gonna get interesting now.

Fetal Position said...

Why is that the top? Wouldn't this be a boon for some sectors?

Bicycle said...

No US oil production growth, no credit growth

Fetal Position said...

Check out this dollar chart, around 1 PM. Yikes!

http://quotes.ino.com/charting/index.html?s=NYBOT_DX&t=&a=&w=&v=s

Christian Gustafson said...

Oh my ... turkey's in the oven and WTC is under $70.

Good luck, HYG ...

Bicycle said...

A very weak low vol holiday showing from the permabulls, and look how daily spike highs just get slammed down when they approach the top of the megaphone.

Our last turn date was 11/20. The next day we put in a huge green candle to give us our first touch of that upper trendline in a *long* time.

The next turn date is on the 10th, right? What if we put in one more spike high to hit that trendline on the 9th or 10th, and then dump?

What if these two turn dates are simply to encapsulate the final topping move of this megaphone?

I may have to start scaling in index shorts next week and pull them off with any move over 18k.

Regarding WTI--remember the last time that US oil production peaked and OPEC pounced--within a year we had the Nixon shock. The US Federal Government has no such tools in its box this time around.

There is some real myopia going around regarding the thought that low oil price is going to provide some bullish boost.

Bryan Franco said...

This blog's monicker is now being proven correct. It wasnt just oil today. Copper, aggriculture... College tuition is next. Ok maybe not that. But eventually.

Bryan Franco said...

Agriculture. Not aggriculture. Yikes.

Phat Repat said...

It's a mixed bag. Price of things you own will go down in value, price of things you need will go up, and rather dramatically on both ends. Housing is just starting to reflect this reality, though much more needed; 90% peak to trough, minimum. ;-)

SPX is flashing us; question to be answered: Full on frontal or lewd but hidden side glimpses? Tick Tock

Buy 2084.30
Sell 2050.22

Wide range and neutral indication; so no action likely at this point.

Just noticed comment moderation; what gives?

Christian Gustafson said...

Comment moderation kicks in when the thread is 2+ weeks old now. So I'll post this weekend with an updated outlook.

2084+ is your buy zone? Funny, it's my current upper target here; will explain later.

Phat Repat said...

Technically 2084 is a sit up and take notice level and would act above 2086.51 (a futures play). Since I am playing both sides with options, until a certain level is breached, I remain sidelined when it comes to futures (and that level changes daily; though automated since I are an engineer :-).

I don't believe it likely and the system is indicating neutral at this point (essentially, uncertain).

Thanks, didn't know that about thread age; will look forward to updated view.

Bicycle said...

Steve from Virginia has a nice new blog post over at the Economic Undertow...

Bicycle said...

Bull pennant on the Dow today to take us back up to the top of the larger megaphone on Fedspeak?

Phat Repat said...

Gap down not easy play in this environ; would not have wanted that. But then again, expectations for a Santa induced rally are rather high. Hmmm...

By my numbers:

Slightly negative bias, but need confirmation per Sell numbers below.

Buy 2077.61 Stop 2053.05 T1 2166.87 (cluster)
Sell 2043.67 Stop 2068.19 T1 1947.48 (cluster)

Clustering like that on both sides doesn't happen too often so let's get ready to...

Numbers will change slightly during trading day, but no action for me at this point. Staying with the 'easy' money. ;-)

Bicycle said...

i still have the greatest enthusiasm and confidence in the mission

and I want to help you

i'm afraid

there is no question about it

i can feel it

T.Berry said...

so much for pullback, want to put in remaining 5% before santa shows up. no complaints here if mkt doesn't cooperate.

T.Berry said...

cg, your 2100 by 12/10 is looking good. we're a sniff from dow 18k. matter of when now. can they get it there by the close? 20k is now less than 12% away.