Sunday, February 23, 2014
My system is currently at +350 after bottoming at -825 on Feb. 6th. In my last post, I mentioned the obvious trades of going long Yen, Treasuries, and Gold and shorting the Dollar and Equities. The first three were big winners while the short Dollar trade was basically a wash. The only trade that didn't really work was shorting stocks which is peculiar since USD/JPY and Treasury yields didn't really perk up with equities. So something is amiss as equities continue to diverge from these other asset classes. But I have cashed in substantial profits and am now awaiting the market's direction. It appears that the market wants to eventually head towards 1900 while USD/JPY sentiment is now less positive but still too positive which may mean another leg lower in the next month below 100. If equities do move higher to 1900, Treasury yields should get back in line and move above 3%. However, there may be more storm before the calm with emerging markets which should roil markets between now and the Fed decision on March 19th.
Monday, January 06, 2014
New Year Outlook
My system is currently at +1050 after peaking at +1200 on Dec. 31st. The contrarian trades for the year should be obvious: Long Yen, Gold, Treasuries and Short Dollar and Equities. The big question is when these contrarian trades trigger. Is it right now or is it six months from now? It will be interesting to see which way stocks head in the new year. If it's lower, then stocks should be sold when we hit 1765 with an 85 point risk at 1850 and a possible move to 1350-1400. However, if we move above 1850 now then over the next two quarters we could see a move to the 2000-2100 area before a drop to 1650-1700. With Gold, you'll either see a panic drop under $1000 before a substantial move higher or you will move now to the $1400-1500 area where there should be sellers. USD/JPY is more obvious to me. It is a sure thing that we are going back under 100 and I have put on a large short position as there is very little doubt in my mind that we are going lower on this pair. If USD/JPY goes higher now, I will continue adding to my short position and am willing to back up the truck to buy Yen as sentiment is as extreme as it gets. I am so certain about this trade that if I am wrong and USD/JPY hits my stop at 120, I will end this blog for good. But don't worry, there is no way that is going to occur. Treasury yields may go slightly higher into this 3-3.50% area but eventually we are going back under 2%.
Monday, December 02, 2013
My system is currently at +950 and has not made it above +1000 since a sell signal occurred on November 1st and yet the market has continued higher creating a very large divergence at the moment. How that divergence gets resolved will be interesting to watch with the jobs report and Fed meeting this month along with the bullish seasonal bias.
Monday, November 11, 2013
Since my last update, my system went down every day and then the last three days it has been flatlined at just under +800. A sell signal occurred when we dropped below +1000 on November 1st. The market is at a crucial area here in the 1760-1800 zone where it could spell trouble for the bulls if they are thwarted here and there are plenty of technical signals going against the bulls. From a secular standpoint, the market will always be a buy for a few decades even if we head to the 1100-1400 level at some point in the next few years. Ultimately the S&P 500 will hit the 7500-10k level in this secular cycle so buying at 1800 or 1200 or 1500 or whatever is not going to matter very much in the grand scheme of things. Average down, average up, average sideways just buy, buy, buy is the mantra going forward.
Monday, October 28, 2013
My system has moved higher to +1225 and has flatlined there for the last several days. An overbought buy signal occurred on October 17th. The market has made its way to this 1760-1800 zone that I had previously thought the market would have a tough time with and now we will find out if that is true. Looking out at the big picture, there is no question we are in a secular bull market. We will get pullbacks of course like in any secular bull which can sometimes be vicious like the '87 crash but we will never go below the 666 low in the S&P 500 as long as anybody lives. I have already vowed to end this blog immediately if I am wrong but I won't be. Even if the market tops out in this zone and goes down/sideways for a few years it will not end the secular bull. Buy and hold is back and we are just in the early stages. There is another 15-20 years to go so buckle up...
Tuesday, October 15, 2013
My system bottomed last Wednesday at +75 and is currently at +700. The bears fell short and were not able to get the market into that 1610-1630 zone which kills that scenario. The bears have one last chance for a big sell-off which would have to occur almost immediately and take us into the 1550-1600 zone by next week. I would expect new all-time highs after that sell-off. But here's the kicker, the only way we get this sharp sell-off is if the debt ceiling is not raised in the next two days as everyone expects. So the bears only hope is for a continued shutdown into next week. Even though the government is and has been irresponsible, are they irresponsible enough to test the limits? We shall see...
Wednesday, October 02, 2013
My system flatlined last Thursday, lower to +875 on Friday, lower to +825 on Monday, higher to +875 yesterday, and lower to +850 today. The major divergence is still intact and now the bears have their best chance in a long time to cause a big sell-off. In fact if the bears don't act on the advantage they have been given, there could be a significant ramp up in the market. However, the bears definitely have the ball and could cause a sell-off very soon. If the bears do follow through, then we could hit the 1610-1630 area next week. We would bounce back towards 1675 after that sell-off but then the zig-zagging down would continue until we reach the 1350-1400 area in Q1. But that's a long way off and not worth thinking about until we see the bears follow through down to this 1610-1630 area next week.