STB Morning Post 09/13/11

Not much to say other than China saved the day yesterday (again). It seems that you can always count on intervention of some sort to save the day (till you can't). Bottom line is they will continue to stick save till they can't. As noted on STB a few months back, it appears that the power brokers in governments around the world are tired of bailing out the banks.

The bankers have bled the system and their puppet politicians as much as possible (times two). The governmental representatives have gained nothing politically as their voter base has become increasingly dissatisfied with their performance. On the other hand, you would assume that the money flowing into their coffers from these special interests is coming in at an astounding rate. Quite the trade off, sacrifice your country and political career while you go for the big cash grab. How American!

I think they are thru throwing good money after bad. I think the politicians are actually beginning to see the light. After throwing a DISCLOSED $4 trillion at the problem (not the actual $30 trillion it took to bail out the world) and getting nothing out of it, maybe, just maybe they are growing a set large enough to take on the banks and the default issues that are coming.

I hope you all like the new look old blog. STB.com is still down and I am actually considering staying here at this point till the new blog is up and running. Comments and suggestions are always welcome. What you like and don't like I need to know so it can be incorporated into the new blog. Don't tell me after the fact, you need to tell me now.

Minis this morning have made quite the recovery (not sure who came in with the big stick (or wantons filled with dollars as sellputs put it yesterday). All it takes is a rumor to move the DOW 100 points either way in minutes. Thus, this is a dangerous playground to bring your ball to. Remember to have a trading plan for each trade and to always use stops.

Minis - yellow channel support being backtested. the blue triangle backtest is just above. 1161 (price at now) is first resistance and then 1178. Those can get run thru with the right "solution" today. Inversely 1123 is the magic number for severe downside action continuation. Bottom line is the markets are consolidating at these levels and remain range bound. Note - I adjusted the channel a bit this morning to what should be a more accurate representation of the channel capturing the last low at 1138 - where it was below the support diagonal yesterday. This is an allowable thing to do and is sometimes necessary when working with charts. STB always reviews his trendline positions and if adjustments are necessary, then I make them (and you should as well).

E-mini Possible channel

Possible channel down. Lower blue trendline is the P2 lower support line. Solid red horizontal line is the 385 retracement of the C move up from the 866 low. the dashed yellow line is the support line from the lows occurring during the C leg up.

Four Possible Solar Plays

If we're gonna get a pop for a 4th wave and then down for 5 but UP for 2 of P3 then now is the time to look at some short term plays on some stocks that got pummeled these last two weeks. As I go thru updating my chartbook, I'll throw out the best of what I find here.

Right now four Alternative Energy plays look like they may be worth looking at. If trends hold true these all look almost ripe for picking. Ne patient and let them come to you and set your stops.

See the charts below.

FSLR



SOLF



TAN



WFR



This last chart compares PBW (Alt Energy Index) to $WTIC (LT sweet crude). They tend to follow each other around and when these get to far apart they correct. Now, this is not saying they both can't correct straight down, but given the possibility of the potential pop due in the market, I'm guessing the near term correction id for alt energy to pop up.

Happy Halloween!

I'll have to update (gladly for once) a whole bunch of charts and get a game plan together. For those of you that missed Kenny's day today, go read the thread. It was sensational all day. UGA v FL world's largest outdoor cocktail party this weekend. I think the dawgs have a chance.

Have a happy and safe halloween!

OK - Just one Spooky chart

Monthly SPX - RSI could not get to the 50 line and is reversing and price closed below the 20ma. See that lower black wedge support line? Spoooooky isn't it?

VIX, VXX and VXZ

I'm gonna need a bigger chart.

What Happens After An AMZN Breakout?

EUR/USD Weekly

The WEEKLY chart is a little busy due to the Fib Retracement on there, but it is there for a reason.

Yellow rising wedge plain as day. Note that it is in a battle with its next to last resistance line before approaching the top. The next stop if it gets thru here is the 78.6% Fib and the resistance at that same level. Another thing to note is that when it tanks it tends to fun a ways and in a hurry. Also notice the indicators. They are spent. There is not much room to run. If this resistance is taken out look for the EUR/USD to top at the $1.52 level and for the other indexes to top there as well.

XLF - It Won't Be Long (Or Will It?)

Bloomberg has Roubini Sees Stock Declines as Soros Warns on Economy. "U.S. consumers are “overdebted” and the country’s banking system has been “basically bankrupt,” Soros said in Istanbul today. “The United States has a long way to go.”" Yet, this same Bloomberg article brings you "Stocks will continue to advance, according to Byron Wien, vice chairman of Blackstone Group LP. The S&P 500 is poised for its biggest fourth-quarter rally in a decade as the economy recovers and earnings exceed analysts’ forecasts, Wien said in an interview on Sept. 28." Interesting, I guess one of these guys is gonna be right. Will Wein be the wiener or the winner?

I came into this article throwing caution to the wind going to the hoop with conviction that XLF is toast. Then I read the Wein remarks and the manipulator alarms all start going off in my head at the same time. Then I also remembered this wedge I have on my chart and the lack of a completed retracement. Then I find Wells Fargo Follow-On Offering In 3...2...1.... on Zero Hedge covering Government Sachs recent upgrades of select financials. Sorry, I'm feeling a little queezy after these findings and you may be as well after reading this.

So I dug some more - From the Yahoo Finance TechTicker I bring you The "Real" Economy Is Dying: Q4 "Going to Be a Bloodbath," Whalen Says. "The shrinkage will continue into 2010, Whalen predicts, suggesting the banking sector hasn't yet seen the peak in loan losses. Institutional Risk Analytics forecasts the FDIC will ultimately need $300 billion to $400 billion to recoup losses to its bank insurance fund. (In other words, the $45 billion the FDIC sought to raise last week by asking banks to prepay fees is just a drop in the bucket.)"

But lets take that puny ass little blurb that Yahoo got from Whalen and put it on steroids at Zero Hedge why don't we - Guest Post: Bank of America - How Much Should Bond Holders Be Haircut To Restore Solvency? "Securitization was once a hidden cash cow for the sponsors, but now that the situation is reversed. Collateral values have fallen dramatically and will fall further in the next 12-18 months, thus banks such as BAC, WFC and C must take that hidden windfall profit out of their pockets and essentially reverse the original transaction - and then some. Otherwise they get sued. This is why the dealers are desperately trying to buy-off prospective plaintiffs with under-the-table payoffs to prevent this ugly reality from being exposed through litigation. This is yet another reason why we laugh uncontrollably when the economists suggest that Lehman should or could have been bailed out."

And then I found 500 To 600 More Bank Failures Coming In Next 12 Months As FDIC "Hit List" Plays Out: 2011 A "Good Year" For "True" Merger Activity According To Raymond James Bank Analyst. Raymond James (at one time the worlds largest investment bank not to long ago) I guess is entitled to an opinion. The title is all the fluff as this is an excerpt from a subscription only article that I would love to get my hands on.

The Big Picture has Bank Failures Reported by FDIC. A nice simple chart.

There, I feel better now, but this is not helping us at all with the conundrum we investors are facing with XLF and those wedges right now. We get the fact that the banks are insolvent and have trillions of worthless paper in the closets all marked to market. Let's just get to the charts shall we.

Oh, a point on XLF you need to be aware of - almost exactly 40% of XLF is made up of BAC(10.63%), JPM (12.54%), WFC (9.47%) and GS (6.83%). That should give you a warm and fuzzy feeling!

XLF Daily Chart (Better viewed HERE) - The divergences in the indicators to price are tremendous on this chart and too big to be ignored. Combine that with the fact that this is a daily chart, the blue trendline breakdown and price consolidating in the black rising wedge very close to a bear market top tendline. It may be pinned under the 25ma after the gap up this morning. Volume is dead.



XLF Weekly Chart (Better viewed HERE) - This is the meat of the technical argument for more downside. In this chart you can see the bear market top trendline (that was abused by most other indexes). You can see my original rising wedge (black dashed) that Mr. Weil might be fixated on. Then you can see the blue wedge nicely ending at the top trendline following a breakdown below the red bull market trendline. Volume is dead.

RSI is of some concern to the bears as the hook up is not desired. I have been begging for divergences to form and it is possible with a pop here RSI will deliver. MACD histogram has a horrible divergence. S Sto has bear crossed and broken the trendline. TRIX resembles Mt. Everest and is peaking. CCI, CMF and MFI might be falling apart.



At this point I have to respect the master manipulators and the possibility that P2 is still alive. Could the shorts get squeezed one last time? The banks have horribly lagged the other indexes (well, except for "certain" banks) deservedly so, yet they may lead the troops down. The mere mention of a second stimulus has me thinking Dow 15,000 without it breaking a sweat. The dollar manipulation is not over. It may have finished a 4 corrective and have a 5 down left (although if it is I think it will truncate).

Point of all of that is that jumping the gun and going balls deep short at this point may not be the smartest thing to do. Sure it looks great. Sure the indicators look like a better shorting opportunity than any other time in this run up. But remember, they have looked good for a serious top about 6 times thus far as well. You are playing against a rigged deck. Bottom line is that it will all come crumbling down to earth sooner than later. If you are short, have a plan and stops set and be prepared to leave a loser. If I am wrong and the upside is in, at least I encouraged you to wear your protection and you slept better because of it.

GL trading.

/ES Now

Possible back test of the green trendline? 1037 - 1044 range before the next fall? Pink wedge completed right above the lower rising wedge P2 tendline and made for a nice spot for a technical (PPT driven) bounce.

OR is it meeting resistance here back testing the lower channel trendline and resistance from the close yesterday?

See my Morning Post below for a bigger chart.

My Dollar Chart

I don't see much more downside at this time, but they could just surprise the hell out of all of us as you hear targets in the lower 70's on the MSM. Bottom line is it looks oversold as all get out. It is at support. IMO a throw under of the E touch of the falling wedge right near the target for a 5th wave. Get real. It should be preparing for launch. Look for RSI to crack the down trend line as a key. This in combination with the VIX chart below and the SPX and you get a brew that is screaming TURN. Have your stops in place and a plan for entering the trade just in case "they" decide to play the devaluation card again.

NOTE: This is a daily chart, and I prefer the weekly charts for major turns. I'll build one and let you know if my opinion changes.

Weekly VIX Chart

Looks like a completed ABC to me. You can see the black fib that is used to measure A and C. 200ma supporting price that is having a positive divergence with SPX. All indicators dramatically oversold. One last trendline to cross.

Will it cross it or will it be rejected? If it does cross look for a 5 wave move up. If not, then this may be a 5 wave move down and we're gonna get a truncated 5th wave. Believe it or not there is still plenty of room of the VIX to fall yet and the triangle formed here could be a 4.

Quick Sunday Night Look At The /ES

3 (or 1) of C up and then 4 (or 2) of C corrective with fibs. Alt count is 1 of 3 down. See ya in the am.



And a look at a larger picture (kind of makes these recent moves look insignificant). See the retracement box for the larger move now? See the support line at 864 near the top of the blue box? I am predicting that will be a big point in the future. Possibly the end of 1 of 3 down.

A B C Update

It ran all the way down to the lower trendline of the upper throwover wedge. This is a pretty critical point to possibly denote the end 4 (or 2) of C of 2 or the possible beginning of 2 of 1 of 3. I have been mentioning a possible zig-zag down here as well. The 60m have bottomed, but I expect them to embed and the dailys are still running south strong. I am hanging on to P2 by the skin of my teeth now. I have a few key indicator points that have not hit yet, but things look really miserable (an they will be soon).

Just something to think about coming into Monday.

T - minus 17 days to my projected 10/12 top date.

You may want to pay attention to what's going on at the G20 meetings. The world just may be changing right before your eyes and you may not even know it.

Enjoy your weekend!

A B C

On the /ES - Some are looking at this as 1 of P3 (which I am not discounting). IMO this is 4 of C down (thus the ABC) with 5 to come. 5 of C up can truncate and thus resolve in a mass consolidation around these levels or it can run to a new high. Counting might get tough soon. I like the lower low! The only reservation I have with the ABC is lack of overall form or a larger definitive formation (triangle or wedge).

Note: No post tonight as I will be traveling to the flooded ATL for dinner.

VIX - Measured Moves?

Choppy? Predictable? Measured? Controlled?



Disclaimer - I am long VXX from 50.65.

Morning Post

So, do you think the Fed will have any surprises today? I don't. How about the people that say the Fed non surprise is priced in? What are the odds of CNBS calling a victory for the investor and following the marching orders of Uncle Ben further declaring the recession is over and that all is well?

I'm not gonna speculate much today cause of the Fed. All I know is that the market is and has been overbought for sometime. Of the last 29 weeks 21 have been up. Of the last 11 weeks 9 have been up. The market is up 61% since the March low (that would be cramming 6 years of average SPX returns in 7 months - so you can say that one month roughly equals one year at this pace). Of course as long as they continue to funnel funds thru the back door (and out of your pockets) into the market and as long as they continue to pummel the dollar like Wallstreetpro2 with a Louisville slugger the ramp job will continue to run.

I am looking for limited upside as the market continues to consolidate as it did in early and late August. I will be looking for the tell tale triangle to form as it has so many times before on this run up. Upside should (should) be limited given the position of the indicators and BB's on the 60m, daily and weekly charts.

/ES 10m chart - Clear wedge formation to the top of B in what I think is an ABC corrective (although weaker than most of us anticipated) for either wave 2 or 4 of C up. at this time I am not expecting a double zig-zag in this corrective, but I (again) would have thought this correction would have had some meat to it. If the wedge plays out a good target would be somewhere near the 1050 low.

The upper wedge line is good support. So is the lower trendline of the long channel up for either 1 or 3 of C. The best support is the combination of back door funds, the beaten down dollar and the cheer leading of CNBS.

GL Trading (you'll need it).

UNG - The Pent Up MEGA Post

Confusion reigns down on the Nat Gas sector. Buy, sell, stay away, you'll make a fortune, buy the producers, buy the commodity, the bottom is in, supply is down, demand is going to grow, Nat gas is going to $2; what the hell? Below are a few posts that I liked from around the web. (Notice the prominent words Volatile and Speculative)

Forbes - 9/21 - Natural Gas Still Too Volatile. "Natural gas prices have recently become lighter than air, as the commodity finally gets some love after a year-long slide. Yet even though it has gained traction, our team of investment advisors is cautious about the fuel, unconvinced demand is set to take off." There you have a more definitive call.

Greenfaucet.com - 9/21 - Speculating on Natural Gas. After moving from $2.50 to $3.77 per BTU last week the pressure is back on the price of natural gas. The rally is based on speculation that prices will continue to rise as inventories fall. Therein lies the issue. Supply has dropped the last two weeks, but not enough to push prices significantly higher. If I were an investor (oh yea, I am) I would take my profit off the table and see how this plays out. The instability in the natural gas contracts has been evident as the downside pressure has controlled the trend. Sounds just like the same thing I have been saying. I like the folks at Greenfaucet and suggest you take a peek at their site while you are there.

Seeking Alpha - ETF Stats for UNG Gives a nice list of SA authors that cover Nat Gas and is worth bookmarking for when you need some good posts on the subject.

BOTTOM LINE is you need to check out EIA's Natural Gas Weekly Update (I added a link in my blogroll). They have the definitive release on Nat Gas pricing and information. You get it from the horses mouth (not the other way around). Very detailed information from the government on the pricing of Nat Gas and the economies surrounding pricing. I'd highly recommend you visit this site for an update before you invest.

EIA provides a monthly Short-Term Energy Outlook. The next update is October 6th. Did you know this, "Despite low relative prices for much of the year, industrial natural gas consumption declined by 12 percent in the first 6 months of 2009 compared with the same period last year. EIA expects this year-over-year consumption decline will continue through the second half of the year for industrial users, although the trend will be less pronounced." How about this, "EIA expects natural gas consumption will increase slightly in the commercial and industrial sectors in 2010 as a result of improved economic conditions and low prices. Consumption remains relatively flat in the residential and electric power sectors next year. The anticipated addition of new coal-fired generating capacity and rising natural gas prices limits the potential for significant increases beyond the forecast 2009 level in natural gas consumption by electric generators."

In other words, don't be looking for some massive recovery in the price of Nat Gas this year or next. This report can give you some reliable information regarding the outlook for crude, nat gas and coal. I will be making it a must read and will notify you of its release here.

I have no hope for any significant rise in UNG till the over supply under demand issue straightens its self out. Sure, as futures roll thru there may be sentimental pops, but the EAI reports say no demand for a year or two until the economy recovers. I expect a long drawn out bottom at these levels for some time.

Given that UNG is still trading at a significant premium to NAV ( Sept 21 - 10.57 NAV and UNG close 11.25, 6.43% which is narrowing) since the supply demand issue is not (nor will it be for some time) worked out, and the general (and expected to be worsening) economic conditions, I fully expect the lows to be tested again.

OK, that all being said let's look at a chart and apply some TA to the situation. 30 and 60m indicators are falling. The daily indicators are topping out. Weekly indicators are mixed. The run off of the capitualive bottom has reached the retracement zone above the 50% fib retracement line. UNG left several gaps on the way up. Price has broken the uptrend line. UNG is forming a possible bull flag at this time. As for the form of the climb, I do not like an ABC. I prefer a 1,2 or a 5 wave count. If a 1,2 I expect a pullback to the 10.45 to 10.10 range. If this is a 5 wave move and 5=1 and gap support holds here the target range should be near 13.18.

30m UNG chart (may be better viewed here and other UNG charts also)



Nat Gas - Oil Spread chart - (Better viewed here). Nat Gas drove up to test it's LT lower trendline and put a spike thru it. Oil is leveling out. Please visit the older Zero Hedge link in the chart for more information of the spread of NG to OIL. This will correct, I believe oil will do most of the correcting downwards. I believe this monthly chart of Nat Gas shows the bottom is in (or should I say it won't get any worse than it already has).



GL trading.

Support Central

Morning Post

Tough call this morning. The channel on the /ES was broken pre-market. The levitation continues. My Market top on 10/12 call is possibly in tact. I'm guessing the mutual funds eventually get one more push to print some really nice QE statements, then all bets are off.

As I have been saying that channel down was part of a 2 or 4 of either 1 or 3 of C Not sure since I am questioning where B actually is. Time will be the only real difference as the two possibilities for B are only 14 points apart in price. Looks like the move off of 991 SPX was a 3 the more I look at it.

Daily SPX Chart - My conundrum is that the channel down possibly completing the 2 or 4 has broken up, but the daily indicators are rolling over, the daily SPX price is at the top of the wedge and the upper BB's are providing some resistance. Are the daily indicators gonna whipsaw and remain embedded? That would make for a nice set up to start P3 in a week or two. MACD hist is trending down RSI is over 70 and looks to want to fall. S Sto got the bear cross going on. ADX falling. CPC very bullish but does not have a divergence yet.

60m SPX Chart - 60m indicators are falling but showing signs of a reversal before bottoming out. There is still room for them to fall and embed.

/ES 60m - You can clearly see the yellow channel down from the 1071 top that some are questioning as the "top". The dark blue line is the top of the P2 rising wedge. Notice these 60m indicators are overbought and appear to be turning south.



Here is a longer view of the /ES 60m wave 1 or 3 channel and the 2 or 4 correction.



I'm gonna go against the manipulators and my better judgment and call for a larger corrective here or more consolidation with limited upside. The Two rising wedges ending and the position of the indicators scream NEAR TERM top and a larger corrective is coming. Now this has happened several times, and several times we all have been wrong. I just don't thing the corrective is big enough yet and might take one more leg down to play out. I'll be looking for the all too familiar triangle to form for the final push to the top. At this time I'm still tentatively short in SDS UUP and VXX with 5% stops in each. If the market should show any strength, I will be exiting shorts quickly and waiting patiently for more downside.

Is the top in? I do not think so. The Fed still has ink and paper. We still have GS running the show. There are green shoots everywhere. The dollar is staying nice and devalued. Regulation is rampant. All of that combined says slightly more upside. I'm on record looking for an external event to set the market on its path to righteousness. More talk about a war to end the recession/depression is perculating. Middle East tensions, oil, China, Russia, Israel - Swine Flu - something is brewing. Dan put up a nice chart on this (SPX 300 anyone?).

P3 should announce it presence loudly. Don't worry about missing the top. It is not that big a deal. You'll be able to get out and have PLENTY of time to play the short side ride. I will refrain from playing any upside from here since SPX is above the rising wedge. Extreme caution right now should be exercised as IMO is is dangerous for both sides up here. This depression is far from over. Welcome to the new Japan.

Koniciwa Bitches!

GL trading.

A Quick Look At The Weekly VIX

This is the big boy, not daily or 60m. This is a weekly chart of the VIX. Price is running along in a positive divergence to SPX since July with the 200ma acting as support now. The indicators are all oversold, have been embedded and are showing divergences to price. When the RSI crosses the 15ma it should be all over IMO.

Is this going to be "the" breakout? Hard to tell with possibly two head fakes already in the books. I think a dead cat bounce has been completed and a double bottom is possibly set. Some (including me) have had other trendlines that possibly show a breakout and back test of the top wedge line. If the move down was an ABC the target for C=A was missed by .10 by my calcs. BB's getting pretty narrow indicating increased volatility again.

No one knows which way the market will move (except on POMO days and every afternoon around 3:30). There is no reason the VIX can not continue to flat line like the dead meaningless index it has become. There is a chance that this is the 4th wave of 5, but 5 would have to truncate given price levels. This could also be a 1,2 move as well. I prefer the ABC mentioned above. Given the current state of the other chart I have been presenting, it looks like a storm is brewing to me.

I am long VXX from 50.65 since last week with a 5% stop.

Chart Better Viewed HERE.