HALL OF FAME MARKET PREDICTIONS
(All Commentary Taken From Live Market Analytix Page...Subscribe Now For Access To Live Market Analytix!)
JULY 21, 2011
3:58PM EST
Gonna go out on a limb here and call this a major top in equities here at 1345 on the S&P....something about today's action is very off, and its reminiscent of price action we've seen at major tops....note tops are not clearly definitive in terms of using a specific set of metrics to identify them, there's usually some X factor which identifies them and we're seeing something along those lines here today
3:58PM EST
Gonna go out on a limb here and call this a major top in equities here at 1345 on the S&P....something about today's action is very off, and its reminiscent of price action we've seen at major tops....note tops are not clearly definitive in terms of using a specific set of metrics to identify them, there's usually some X factor which identifies them and we're seeing something along those lines here today
3:18PM EST
Market acting very strange today, not sure what's going exactly as NYT deficit plan news launched stocks midday yet once it was refuted buy program continued to bid up stocks...gut tells me that we're hitting some sort of significant top here as news headlines suspicious along with bearish price action in high beta tech names...also weak China PMI news will be a concern at some point as world's growth driver now appears to be contracting in terms of manufacturing, also dont believe Eurozone debt issues are over by a long shot, and moreover continue to believe the US debt ceiling issue won't be resolved until the final hour where it will be resolved in an untraditional manner, most likely with Obama bypassing Congressional approval to raise debt limit himself (which is exactly what Republicans want)...also as noted last week we believe downgrade of US credit rating is approaching near-term, and we're hearing more and more chatter of this from the likes of S&P and other credit analysts who believe even if the debt limit is raised, there's still a good chance the US will lose its AAA credit rating...this of course will make major headlines and rattle markets as so many other debt instruments tied to US having AAA rating, so this remains a major risk to markets over the next several weeks even if debt ceiling is raised here near-term...with this continued bearish outlook on several macro front we remain bullish on precious metals and would continue to hold onto Gold and Silver longs here as we believe they are simply shaking out some overcrowded longs here and setting up for another push to new highs here shortly...looking ahead to tomorrow, no economic data due out so barring any major headlines should be a rather slow session even with MSFT reporting tonight...with respect to MSFT, wall street has somewhat fallen in love with the stock again on hopes that Skype deal may spark some growth, however slower PC sales may dampen numbers a bit so rather neutral on the stock heading into earnings...may see marginal +/-1% move in the stock on numbers
Market acting very strange today, not sure what's going exactly as NYT deficit plan news launched stocks midday yet once it was refuted buy program continued to bid up stocks...gut tells me that we're hitting some sort of significant top here as news headlines suspicious along with bearish price action in high beta tech names...also weak China PMI news will be a concern at some point as world's growth driver now appears to be contracting in terms of manufacturing, also dont believe Eurozone debt issues are over by a long shot, and moreover continue to believe the US debt ceiling issue won't be resolved until the final hour where it will be resolved in an untraditional manner, most likely with Obama bypassing Congressional approval to raise debt limit himself (which is exactly what Republicans want)...also as noted last week we believe downgrade of US credit rating is approaching near-term, and we're hearing more and more chatter of this from the likes of S&P and other credit analysts who believe even if the debt limit is raised, there's still a good chance the US will lose its AAA credit rating...this of course will make major headlines and rattle markets as so many other debt instruments tied to US having AAA rating, so this remains a major risk to markets over the next several weeks even if debt ceiling is raised here near-term...with this continued bearish outlook on several macro front we remain bullish on precious metals and would continue to hold onto Gold and Silver longs here as we believe they are simply shaking out some overcrowded longs here and setting up for another push to new highs here shortly...looking ahead to tomorrow, no economic data due out so barring any major headlines should be a rather slow session even with MSFT reporting tonight...with respect to MSFT, wall street has somewhat fallen in love with the stock again on hopes that Skype deal may spark some growth, however slower PC sales may dampen numbers a bit so rather neutral on the stock heading into earnings...may see marginal +/-1% move in the stock on numbers
JULY 12
3:15PM EST
Equities continue to fade here as we head into the close as we noted equities would likely get spooked a bit over Fed commentary that economic activity is weak enough to warrant yet another round of stimulus...again, big beneficiary will be Gold and Silver as QE3 now a major tailwind in addition to major concern over Eurozone sovereign debt, European banks, uncertainty over US debt ceiling, and bullish technicals, all of which are creating the absolute perfect storm for precious metals here...important to note, now that Fed has openly discussed the possibility of QE3, each and every piece of weaker than expected economic data from here on out will raise the probability of QE3, and hence expect to see much stronger reactions in Gold and Silver on economic data releases...in terms of upping our exposure to precious metals, we just went long August 36 SLV calls here in $1.30s as we believe Gold breakout to new highs will produce a major short squeeze in silver here near-term as funds and especially retailers scramble to regain exposure to precious metals, and will likely jump into this higher beta metal just as they did several months ago...will we see new highs in Silver? doubtful, however we believe we'll see another move over $40 near-term and we'll reassess strength of momentum once we get there
3:15PM EST
Equities continue to fade here as we head into the close as we noted equities would likely get spooked a bit over Fed commentary that economic activity is weak enough to warrant yet another round of stimulus...again, big beneficiary will be Gold and Silver as QE3 now a major tailwind in addition to major concern over Eurozone sovereign debt, European banks, uncertainty over US debt ceiling, and bullish technicals, all of which are creating the absolute perfect storm for precious metals here...important to note, now that Fed has openly discussed the possibility of QE3, each and every piece of weaker than expected economic data from here on out will raise the probability of QE3, and hence expect to see much stronger reactions in Gold and Silver on economic data releases...in terms of upping our exposure to precious metals, we just went long August 36 SLV calls here in $1.30s as we believe Gold breakout to new highs will produce a major short squeeze in silver here near-term as funds and especially retailers scramble to regain exposure to precious metals, and will likely jump into this higher beta metal just as they did several months ago...will we see new highs in Silver? doubtful, however we believe we'll see another move over $40 near-term and we'll reassess strength of momentum once we get there
2:11PM EST
Putting a target of $1625-1650 on Gold next week, Silver $40-42 as this discussion of QE3 in FOMC minutes will produce a major retail as well as fund chase in precious metals again here near-term which will force all previous metals shorts to cover
Putting a target of $1625-1650 on Gold next week, Silver $40-42 as this discussion of QE3 in FOMC minutes will produce a major retail as well as fund chase in precious metals again here near-term which will force all previous metals shorts to cover
JULY 5, 2011
3:31PM EST
Equities still holding onto gains into close even after intraday Moodys headline on Portugal...have a feeling Fed told banks to hold onto June POMO capital and stockpile it for last week of June and into July to transition market into a non-QE environment...so Fed essentially bought up those bonds in June, banks held onto capital (note equity market weakness in June) and are now putting it to work here in July to kill that "no QE = equity market is screwed" theory....however this bid will not be here indefinitely in my opinion, it will probably linger for the first couple weeks of July then we'll start to see it die off as POMO capital dwindles down to zero and market is left with very few bidders...so next couple weeks we'll likely see this bid in markets regardless of news, optimal short may therefore come mid-July sometime....in the meantime, long bias toward equities probably best bet here...outside of equities, precious metals looking very solid with both GLD and SLV bouncing strongly off double bottom, have a feeling todays move is the start of a strong technical upleg with Silver likely trading up to $39-40 and Gold retesting those $1570 highs, therefore just got long August 148 GLD Calls at $2.65 while continuing to hold onto SLV long position from $33.75 (initial inverted head and shoulders we spotted on SLV chart did not pan out but ETF held onto $32.00 level where our stop was set)...with respect to tomorrow, ADP Employment will give us another look at private labor market and ISM Services also out just after the bell at 10AM, based on price action so far (no real mystery sellers) numbers should probably be ok with any technical dip down to 1330 or so on S&P likely being bought...also continue to keep an eye on dollar here near-term even though equities likely to decouple a bit from correlation to greenback, however still important to watch it as a gauge of Eurozone stress as dollar action very much hinged on Euro action here...symmetrical triangle on FXE chart show FXE should head down to just under $142.00 on this pullback, UUP just over $21.50
3:31PM EST
Equities still holding onto gains into close even after intraday Moodys headline on Portugal...have a feeling Fed told banks to hold onto June POMO capital and stockpile it for last week of June and into July to transition market into a non-QE environment...so Fed essentially bought up those bonds in June, banks held onto capital (note equity market weakness in June) and are now putting it to work here in July to kill that "no QE = equity market is screwed" theory....however this bid will not be here indefinitely in my opinion, it will probably linger for the first couple weeks of July then we'll start to see it die off as POMO capital dwindles down to zero and market is left with very few bidders...so next couple weeks we'll likely see this bid in markets regardless of news, optimal short may therefore come mid-July sometime....in the meantime, long bias toward equities probably best bet here...outside of equities, precious metals looking very solid with both GLD and SLV bouncing strongly off double bottom, have a feeling todays move is the start of a strong technical upleg with Silver likely trading up to $39-40 and Gold retesting those $1570 highs, therefore just got long August 148 GLD Calls at $2.65 while continuing to hold onto SLV long position from $33.75 (initial inverted head and shoulders we spotted on SLV chart did not pan out but ETF held onto $32.00 level where our stop was set)...with respect to tomorrow, ADP Employment will give us another look at private labor market and ISM Services also out just after the bell at 10AM, based on price action so far (no real mystery sellers) numbers should probably be ok with any technical dip down to 1330 or so on S&P likely being bought...also continue to keep an eye on dollar here near-term even though equities likely to decouple a bit from correlation to greenback, however still important to watch it as a gauge of Eurozone stress as dollar action very much hinged on Euro action here...symmetrical triangle on FXE chart show FXE should head down to just under $142.00 on this pullback, UUP just over $21.50
MAY 2, 2011
3:38PM EST
S&P breaking below 1361 neckline of head and shoulders we highlighted earlier today (see 1:59PM entry)...OIH, AAPL, SMH, Oil, Gold all down to low of the day, dollar now ticking up to high of the day and about to go green...something definitely changing here today especially with respect to bid in equities, get short equities and commodities here, short-dated SPY/QQQ + short-dated Energy-related puts (OIH USO XLE) highly attractive, get long dollar
3:38PM EST
S&P breaking below 1361 neckline of head and shoulders we highlighted earlier today (see 1:59PM entry)...OIH, AAPL, SMH, Oil, Gold all down to low of the day, dollar now ticking up to high of the day and about to go green...something definitely changing here today especially with respect to bid in equities, get short equities and commodities here, short-dated SPY/QQQ + short-dated Energy-related puts (OIH USO XLE) highly attractive, get long dollar
3:21PM EST
Dollar seeing a slight bit of short covering into the close with commodities across the board (Oil, Gold, Silver) all trading well off those morning highs...seeing definite signs here that something is changing in markets, change may be Fed buy program pulling back on the bid to produce lower prices in stocks near-term in order to force Congress' hand on debt ceiling vote (ie market loves to tank ahead of critical votes in order to show Congress what may happen if they fail to make the "right" choice)...believe its highly probable we're going to retrace much of this past 2 weeks rally on the S&P near-term with key target at the April 19th gap at 1312 and above average probability of overshoot to April 19th low at 1294 due to Fed possibly greenlighting lower equity prices in order to put pressure on Congress ahead of debt ceiling vote...near-dated SPY/QQQQ puts a solid risk/reward bet here, note we took some May 136 weekly SPY puts on Friday ahead of the close (see 3:50PM entry)
Dollar seeing a slight bit of short covering into the close with commodities across the board (Oil, Gold, Silver) all trading well off those morning highs...seeing definite signs here that something is changing in markets, change may be Fed buy program pulling back on the bid to produce lower prices in stocks near-term in order to force Congress' hand on debt ceiling vote (ie market loves to tank ahead of critical votes in order to show Congress what may happen if they fail to make the "right" choice)...believe its highly probable we're going to retrace much of this past 2 weeks rally on the S&P near-term with key target at the April 19th gap at 1312 and above average probability of overshoot to April 19th low at 1294 due to Fed possibly greenlighting lower equity prices in order to put pressure on Congress ahead of debt ceiling vote...near-dated SPY/QQQQ puts a solid risk/reward bet here, note we took some May 136 weekly SPY puts on Friday ahead of the close (see 3:50PM entry)
2:34PM EST
Note Oil Services were unable to push to new highs with S&P and broader market, and now under pressure on an otherwise flat day...could be a headfake, however action over past few weeks with market pushing higher is suspect...we remain short the OIH and continue to believe Oil is a prime short here from these levels on thesis of very strong demand destruction at this +$110 level...domestic economy simply can not handle these price levels of gasoline and oil without seeing consumers change energy consumption habits...as noted, over the next several weeks believe it is highly probably we will see WTI Oil break below $100/barrel
Note Oil Services were unable to push to new highs with S&P and broader market, and now under pressure on an otherwise flat day...could be a headfake, however action over past few weeks with market pushing higher is suspect...we remain short the OIH and continue to believe Oil is a prime short here from these levels on thesis of very strong demand destruction at this +$110 level...domestic economy simply can not handle these price levels of gasoline and oil without seeing consumers change energy consumption habits...as noted, over the next several weeks believe it is highly probably we will see WTI Oil break below $100/barrel
APRIL 28, 2011
1:12PM EST
Sell programs lurking in commodities all day with Oil Gold and Silver seeing waves of sell pressure all at the same time (indicative of big fund liquidating a big long commodity position)...commodity trade feels like its about to see some significant unwinding near-term, expect that it will be triggered by a dollar rally....just added to DTO long position here in $38.70s (perfect double bottom), as noted yesterday (see 10:53AM entry) putting a heavy short on Oil here (long DTO, long May 44 USO puts, long UAL), believe WTI Crude about to breakdown big here on demand concerns with a print below $100/barrel sometime over the next few weeks
1:12PM EST
Sell programs lurking in commodities all day with Oil Gold and Silver seeing waves of sell pressure all at the same time (indicative of big fund liquidating a big long commodity position)...commodity trade feels like its about to see some significant unwinding near-term, expect that it will be triggered by a dollar rally....just added to DTO long position here in $38.70s (perfect double bottom), as noted yesterday (see 10:53AM entry) putting a heavy short on Oil here (long DTO, long May 44 USO puts, long UAL), believe WTI Crude about to breakdown big here on demand concerns with a print below $100/barrel sometime over the next few weeks
APRIL 25, 2011
10:13AM EST
Oil also red now even with middle east tension rising a bit this weekend, USO chart showing a nice double top just above $45, DTO double bottom...UAL also held up very well last week amid push higher in Oil, price action signaling Oil weakness near-term, would watch for breakout over $22 in UAL, strong push higher in DTO next several sessions
10:13AM EST
Oil also red now even with middle east tension rising a bit this weekend, USO chart showing a nice double top just above $45, DTO double bottom...UAL also held up very well last week amid push higher in Oil, price action signaling Oil weakness near-term, would watch for breakout over $22 in UAL, strong push higher in DTO next several sessions
FEBRUARY 24, 2011
10:24AM EST
Putting a big short on financials this morning, short GS $163.20s, BAC at $14.00, MS at $29.38, JPM at $46.04....as noted yesterday before the close (see 3:15PM entry) financials were our next area of interest with respect to shorts as we believe recent weakness in both US Treasuries and the US Dollar in the face of a sharp increase in volatility in equities validates our thesis that central banks no longer view US assets as safe havens but rather assets with increased risk due to concerns over budget deficits on the federal and state level as well as irresponsible monetary policy decisions (Bernanke continues to print money in the face of rapidly rising inflation levels)...moreover, this underlying weakness comes ahead of a looming vote on US debt limits which need to be raised in the few weeks otherwise the US will default on its debt and Treasuries will plummet (even if debt ceiling is raised, expect bond yields to rise as US will be selling even more Treasuries to finance its budge deficits, in other words only outcome is taking on more debt or defaulting)...with respect to financials, we expect this discussion over US debt will likely produce concerns over US credit quality and will create another headwind for equities where banks will likely feel the brunt of the sell pressure due to their strong sensitivity to changes in perceptions of credit quality...lastly, with Oil prices elevated, concerns over stagflation (which we identified as a major risk in 2011) are increasing and are adding to concerns over consumer spending and overall US growth and this will also translate into heightened worries over credit quality and will likely produce concerns over possibility of a double dip in housing which of course would also add to downside pressure in banks...also note European sovereign debt issues are far from over (Portugese debt yields have been quietly rising over the past couple weeks) and any resurrection of concerns over seas will also produce questions over US bank exposure to European debt...in other words, appear there is a perfect storm of concerns brewing within financials
10:24AM EST
Putting a big short on financials this morning, short GS $163.20s, BAC at $14.00, MS at $29.38, JPM at $46.04....as noted yesterday before the close (see 3:15PM entry) financials were our next area of interest with respect to shorts as we believe recent weakness in both US Treasuries and the US Dollar in the face of a sharp increase in volatility in equities validates our thesis that central banks no longer view US assets as safe havens but rather assets with increased risk due to concerns over budget deficits on the federal and state level as well as irresponsible monetary policy decisions (Bernanke continues to print money in the face of rapidly rising inflation levels)...moreover, this underlying weakness comes ahead of a looming vote on US debt limits which need to be raised in the few weeks otherwise the US will default on its debt and Treasuries will plummet (even if debt ceiling is raised, expect bond yields to rise as US will be selling even more Treasuries to finance its budge deficits, in other words only outcome is taking on more debt or defaulting)...with respect to financials, we expect this discussion over US debt will likely produce concerns over US credit quality and will create another headwind for equities where banks will likely feel the brunt of the sell pressure due to their strong sensitivity to changes in perceptions of credit quality...lastly, with Oil prices elevated, concerns over stagflation (which we identified as a major risk in 2011) are increasing and are adding to concerns over consumer spending and overall US growth and this will also translate into heightened worries over credit quality and will likely produce concerns over possibility of a double dip in housing which of course would also add to downside pressure in banks...also note European sovereign debt issues are far from over (Portugese debt yields have been quietly rising over the past couple weeks) and any resurrection of concerns over seas will also produce questions over US bank exposure to European debt...in other words, appear there is a perfect storm of concerns brewing within financials
MARCH 1, 2011
1:04PM EST
Near-Term Outlook For Equities, Commodities, Dollar, and Treasuries
Lot of action today with so many headlines crossing so we'll summarize what we're looking for across financial markets near-term:
1) Expect dollar will break below November 4th lows with increasing concern of outright dollar crash which will produce another leg higher in commodities with notable breakout in precious metals (Gold and Silver) which have already been showing strong bullish bias over the past couple weeks (central banks have likely been aggressive in reallocating out of dollar and into precious metals due to frustration over US monetary policy and its effect on global inflation levels)
2) Expect further upside in Crude Oil as middle east tension far from over with unrest in Iran and Saudi Arabia pushing Brent Crude to $125-130, WTI Crude to roughly $105
3)Soaring commodity prices stemming from further dollar declines to produce another leg lower in Treasuries as inflation concerns intensify...downleg in treasuries may also be exacerbated by central bank concerns over US credit quality due to municipal debt/federal deficits which may produce more aggressive liquidation of Treasuries
4) Soaring energy prices coupled with concerns over dollar weakness to produce major breakdown in equities with S&P breaking down below 50-day EMA (currently at 1290.94) with tech and financials leading the way to the downside...tech weakness will stem from head and shoulder on Nasdaq and QQQQ chart which we outlined last week, weakness in financials will stem from waning confidence in 2011 growth forecasts (due to weight of rising inflation) in addition to possible concerns over municipal/federal credit quality stemming from intensifying discussion over US budget deficits as government is quickly approaching its US debt ceiling which if not raised will result in shut down of government and possible default on debt
1:04PM EST
Near-Term Outlook For Equities, Commodities, Dollar, and Treasuries
Lot of action today with so many headlines crossing so we'll summarize what we're looking for across financial markets near-term:
1) Expect dollar will break below November 4th lows with increasing concern of outright dollar crash which will produce another leg higher in commodities with notable breakout in precious metals (Gold and Silver) which have already been showing strong bullish bias over the past couple weeks (central banks have likely been aggressive in reallocating out of dollar and into precious metals due to frustration over US monetary policy and its effect on global inflation levels)
2) Expect further upside in Crude Oil as middle east tension far from over with unrest in Iran and Saudi Arabia pushing Brent Crude to $125-130, WTI Crude to roughly $105
3)Soaring commodity prices stemming from further dollar declines to produce another leg lower in Treasuries as inflation concerns intensify...downleg in treasuries may also be exacerbated by central bank concerns over US credit quality due to municipal debt/federal deficits which may produce more aggressive liquidation of Treasuries
4) Soaring energy prices coupled with concerns over dollar weakness to produce major breakdown in equities with S&P breaking down below 50-day EMA (currently at 1290.94) with tech and financials leading the way to the downside...tech weakness will stem from head and shoulder on Nasdaq and QQQQ chart which we outlined last week, weakness in financials will stem from waning confidence in 2011 growth forecasts (due to weight of rising inflation) in addition to possible concerns over municipal/federal credit quality stemming from intensifying discussion over US budget deficits as government is quickly approaching its US debt ceiling which if not raised will result in shut down of government and possible default on debt
FEBRUARY 18, 2011
11:58AM EST
Silver and Silver miners (SLW CDE) squeezing hard here with metal now trading at levels not seen since 1980, note this comes in tandem with dollar hitting new intraday lows...central banks (most likely China) continue to unload dollar and are likely adding Silver to reserves in addition Gold...reiterate believe we have strong potential to see a crash in the US dollar and US Treasuries due to aggressive foreign liquidation stemming from frustration with USs irresponsible monetary policy (printing dollars endlessly with little concern for global inflation levels)...expect to see equal and opposite upside move in the metals as dollar/Treasuries sold off with strong potential for parabolic moves in Gold and Silver as central banks make a definitive statement that it they are done using the dollar as a primary reserve currency...optimal positioning with respect to equities is short UUP TLT, long TBT GLD SLV, also believe as noted February 4th (see 12:33PM entry "Current Rally In Equities May Be Derailed By Foreign Liquidation Of US Dollars/US Treasuries Stemming From Frustration With US Monetary Policy) this collapse in the dollar and Treasuries will be the ultimate backbreaker of this rally in equities
11:58AM EST
Silver and Silver miners (SLW CDE) squeezing hard here with metal now trading at levels not seen since 1980, note this comes in tandem with dollar hitting new intraday lows...central banks (most likely China) continue to unload dollar and are likely adding Silver to reserves in addition Gold...reiterate believe we have strong potential to see a crash in the US dollar and US Treasuries due to aggressive foreign liquidation stemming from frustration with USs irresponsible monetary policy (printing dollars endlessly with little concern for global inflation levels)...expect to see equal and opposite upside move in the metals as dollar/Treasuries sold off with strong potential for parabolic moves in Gold and Silver as central banks make a definitive statement that it they are done using the dollar as a primary reserve currency...optimal positioning with respect to equities is short UUP TLT, long TBT GLD SLV, also believe as noted February 4th (see 12:33PM entry "Current Rally In Equities May Be Derailed By Foreign Liquidation Of US Dollars/US Treasuries Stemming From Frustration With US Monetary Policy) this collapse in the dollar and Treasuries will be the ultimate backbreaker of this rally in equities
FEBRUARY 4, 2011
12:33PM EST
Current Rally In Equities May Be Derailed By Central Bank Liquidation Of US Dollars/US Treasuries Stemming From Frustration Over US Monetary Policy
Volume dropping off following early morning volume surge on unemployment numbers, Mubarak resignation rumors...Oil Services names and Financials dragging however market continues to hold up very well on tech and retail strength, continue to expect we're gonna see new highs on the S&P before the close on bond capital inflows + Fed buy program (inverted H&S on the 5- day SPY chart should play out nicely)...getting ready to initiate a short position in UUP on a push above $22.60s as chart looks to be forming a possible head and shoulders here (shoulders at $22.70, head at $23.40-23.50, neckline at Nov. 4th low at $21.90)...as noted yesterday (see 2:36PM entry) we believe in addition to expectations of continued wide interest rate differentials (low rates here in the US to spur economic activity, high interest rates overseas to combat inflation) and chatter over possible QE3 due to persistent high unemployment (ie. possibly $100s of billions of additional dollars printed), the dollar (and Treasuries) may also see an uptick in sell pressure near-term due to frustration over US monetary policy and the blatant disregard for the effect its having on global food prices (highlighted by Bernanke statements yesterday at National Press Conference)...believe we may begin to see more aggressive liquidation of US assets held by foreign central banks (namely the dollar and Treasuries) as an attempt to put pressure on the US to begin ending its extensive money printing (selling of Treasury bonds raises borrowing costs for US removing easy access to capital markets US has been accustomed to, selling of dollar produces more heightened inflation domestically forcing US to feel the detrimental effect of its own monetary policy)....remember back in April 2010 a Euro sell-off catalyzed a market breakdown, this time we believe it may be triggered by a major sell-off in the dollar and Treasuries
12:33PM EST
Current Rally In Equities May Be Derailed By Central Bank Liquidation Of US Dollars/US Treasuries Stemming From Frustration Over US Monetary Policy
Volume dropping off following early morning volume surge on unemployment numbers, Mubarak resignation rumors...Oil Services names and Financials dragging however market continues to hold up very well on tech and retail strength, continue to expect we're gonna see new highs on the S&P before the close on bond capital inflows + Fed buy program (inverted H&S on the 5- day SPY chart should play out nicely)...getting ready to initiate a short position in UUP on a push above $22.60s as chart looks to be forming a possible head and shoulders here (shoulders at $22.70, head at $23.40-23.50, neckline at Nov. 4th low at $21.90)...as noted yesterday (see 2:36PM entry) we believe in addition to expectations of continued wide interest rate differentials (low rates here in the US to spur economic activity, high interest rates overseas to combat inflation) and chatter over possible QE3 due to persistent high unemployment (ie. possibly $100s of billions of additional dollars printed), the dollar (and Treasuries) may also see an uptick in sell pressure near-term due to frustration over US monetary policy and the blatant disregard for the effect its having on global food prices (highlighted by Bernanke statements yesterday at National Press Conference)...believe we may begin to see more aggressive liquidation of US assets held by foreign central banks (namely the dollar and Treasuries) as an attempt to put pressure on the US to begin ending its extensive money printing (selling of Treasury bonds raises borrowing costs for US removing easy access to capital markets US has been accustomed to, selling of dollar produces more heightened inflation domestically forcing US to feel the detrimental effect of its own monetary policy)....remember back in April 2010 a Euro sell-off catalyzed a market breakdown, this time we believe it may be triggered by a major sell-off in the dollar and Treasuries
FEBRUARY 17, 2011
11:31AM EST
Low volume environment continues however not even sure how the indices are holding up here with AAPL down almost 2% now, financials weak across the board, and commodity names (except for Oil Services) virtually flat even with higher commodity prices...even with Fed buy program holding market up, we're getting more bearish here at these levels due to mounting uncertainty with respect to major macro issues (inflation, US debt ceiling vote, QE), rising geopolitical tension, and bullish action in VIX over the past few sessions...if you're heavy long would start to get a lot smaller in size and buy some put protection here as volatility feels like its about to start upticking over the next couple weeks...also keep an eye on the dollar here as it continues to weaken, believe we're going to see new lows in the dollar ($21.91 on UUP) here over the next couple weeks which will get the markets attention and ignite chatter over possible dollar crash...as noted we believe recent weakness in dollar has to do with more aggressive central bank liquidation of the currency in response to frustration over US monetary policy and its effects on inflation...of course with continued devaluation of dollar comes higher Gold prices as central banks likely swapping out of greenback for Gold, so really no reason we cant see new highs in Gold here over the next couple weeks, so feel free to get long Gold on any pullbacks near-term
11:31AM EST
Low volume environment continues however not even sure how the indices are holding up here with AAPL down almost 2% now, financials weak across the board, and commodity names (except for Oil Services) virtually flat even with higher commodity prices...even with Fed buy program holding market up, we're getting more bearish here at these levels due to mounting uncertainty with respect to major macro issues (inflation, US debt ceiling vote, QE), rising geopolitical tension, and bullish action in VIX over the past few sessions...if you're heavy long would start to get a lot smaller in size and buy some put protection here as volatility feels like its about to start upticking over the next couple weeks...also keep an eye on the dollar here as it continues to weaken, believe we're going to see new lows in the dollar ($21.91 on UUP) here over the next couple weeks which will get the markets attention and ignite chatter over possible dollar crash...as noted we believe recent weakness in dollar has to do with more aggressive central bank liquidation of the currency in response to frustration over US monetary policy and its effects on inflation...of course with continued devaluation of dollar comes higher Gold prices as central banks likely swapping out of greenback for Gold, so really no reason we cant see new highs in Gold here over the next couple weeks, so feel free to get long Gold on any pullbacks near-term
FEBRUARY 22, 2011
3:37PM EST
Indices hitting low of the day here as expected with all sectors continuing to fall apart, really just no bids anywhere with funds heavily on the ask, really see no reason why we won't see 50-day EMA at 1285 fairly quickly...believe me, been trying to hold back on getting excessively bearish again as indices have rebounded every single time theres been a sell-off, but this one feels like it has firmer underpinnings with Brent Crude over $100 and WTI within striking distance of $100 which is producing much more significant fear of decline in consumer spending and growth....we mentioned several times that ultimate breakdown would need to be ignited by a major macro catalyst which would produce concerns over the trajectory of our economic recovery, and here with soaring Oil prices we now have that macro catalyst and this will serve to magnify any other issues which arise (ie US debt limit, rising global interest rates, any concerns over bank balance sheets which might arise with a weaker growth outlook, etc)...couple this with extremely crowded long positions, extremely low short interest (supply/demand profile highly conducive to lower prices) and we have all the ingredients for further downside with the added characteristic of high velocity (ie rapidly falling prices)...obviously the fear here is that we see yet another push higher driven by Fed buy program however we believe we're now in another optimal short period where potential for major breakdown is very high so we're willing to give short positions some breathing room, meaning we don't want to be quick to cover positions here for small gains and miss the major downleg we've been looking for
3:37PM EST
Indices hitting low of the day here as expected with all sectors continuing to fall apart, really just no bids anywhere with funds heavily on the ask, really see no reason why we won't see 50-day EMA at 1285 fairly quickly...believe me, been trying to hold back on getting excessively bearish again as indices have rebounded every single time theres been a sell-off, but this one feels like it has firmer underpinnings with Brent Crude over $100 and WTI within striking distance of $100 which is producing much more significant fear of decline in consumer spending and growth....we mentioned several times that ultimate breakdown would need to be ignited by a major macro catalyst which would produce concerns over the trajectory of our economic recovery, and here with soaring Oil prices we now have that macro catalyst and this will serve to magnify any other issues which arise (ie US debt limit, rising global interest rates, any concerns over bank balance sheets which might arise with a weaker growth outlook, etc)...couple this with extremely crowded long positions, extremely low short interest (supply/demand profile highly conducive to lower prices) and we have all the ingredients for further downside with the added characteristic of high velocity (ie rapidly falling prices)...obviously the fear here is that we see yet another push higher driven by Fed buy program however we believe we're now in another optimal short period where potential for major breakdown is very high so we're willing to give short positions some breathing room, meaning we don't want to be quick to cover positions here for small gains and miss the major downleg we've been looking for
MARCH 7, 2011
1:22PM EST
Fact that Nasdaq is significantly outperforming to the downside today and more importantly being led down by semis is a huge red flag...note huge change in sentiment today with respect to Nasdaq and Semis where last week on wednesday, thursday, friday Nasdaq and Semi were significantly outperforming and today they are getting dumped extremely aggressively with Nasdaq outperforming DOW by over 2-1 percentagewise...to be honest today's selling pressure feels as if there is something else outside of Oil lurking in the water and maybe resurrecting itself shortly...note Greek and Portugese CDSs hitting new highs today, and Munis getting hit as seen by MUB chart....what's strange is we have not seen sell programs let up ever since the opening bell and they are showing no signs of letting up almost 4 hours into the session here (SPYs now over 120M in volume) and moreover this selling pressure is on no real new headlines which leads one to believe that maybe there is some pending newsline on its way...as we noted several times over the past few weeks (see Feb 24th 1:23PM entry + Feb. 25th 9:18AM entry), this initial pullback has been 100% predicated on a surge in Oil, should another negative news headline hit in tandem with +$100 Oil this market is going to crater
Chart Of The Day: Major Shift In Nasdaq/Semi Performance Indicative Of Market Top
1:22PM EST
Fact that Nasdaq is significantly outperforming to the downside today and more importantly being led down by semis is a huge red flag...note huge change in sentiment today with respect to Nasdaq and Semis where last week on wednesday, thursday, friday Nasdaq and Semi were significantly outperforming and today they are getting dumped extremely aggressively with Nasdaq outperforming DOW by over 2-1 percentagewise...to be honest today's selling pressure feels as if there is something else outside of Oil lurking in the water and maybe resurrecting itself shortly...note Greek and Portugese CDSs hitting new highs today, and Munis getting hit as seen by MUB chart....what's strange is we have not seen sell programs let up ever since the opening bell and they are showing no signs of letting up almost 4 hours into the session here (SPYs now over 120M in volume) and moreover this selling pressure is on no real new headlines which leads one to believe that maybe there is some pending newsline on its way...as we noted several times over the past few weeks (see Feb 24th 1:23PM entry + Feb. 25th 9:18AM entry), this initial pullback has been 100% predicated on a surge in Oil, should another negative news headline hit in tandem with +$100 Oil this market is going to crater
Chart Of The Day: Major Shift In Nasdaq/Semi Performance Indicative Of Market Top
2:00PM EST
Every single bounce thus far extremely shallow and being sold into, even Fed buy program feels weaker in strength and not as aggressive on the bid as it is really not taking the opportunity to rally market every time volume drops off a bit...in our opinion today is some sort of major turning point in equities, feel of sell-off and intraday behavior is different than what we've been seeing over the past several weeks even on down days...highly suspect there's new news coming which will cause equities to fall apart dramatically...also note major 100K outlier trade in March 116 SPY puts
Every single bounce thus far extremely shallow and being sold into, even Fed buy program feels weaker in strength and not as aggressive on the bid as it is really not taking the opportunity to rally market every time volume drops off a bit...in our opinion today is some sort of major turning point in equities, feel of sell-off and intraday behavior is different than what we've been seeing over the past several weeks even on down days...highly suspect there's new news coming which will cause equities to fall apart dramatically...also note major 100K outlier trade in March 116 SPY puts
2:12PM EST
Nasdaq sitting right at 50-day EMA support here at 2732, as noted 2 weeks ago (see Feb. 25th - 1:28PM headline) we fully expect Nasdaq to break below not only 50-day EMA support but also the neckline of an 2-month head and shoulders which sits at 2675...continue to hold April 58 QQQQ puts, expect these to be big multibagger over the coming weeks as tech (as well as financials - see Feb 24th 10:24AM entry) looks to lead market breakdown
Nasdaq sitting right at 50-day EMA support here at 2732, as noted 2 weeks ago (see Feb. 25th - 1:28PM headline) we fully expect Nasdaq to break below not only 50-day EMA support but also the neckline of an 2-month head and shoulders which sits at 2675...continue to hold April 58 QQQQ puts, expect these to be big multibagger over the coming weeks as tech (as well as financials - see Feb 24th 10:24AM entry) looks to lead market breakdown
MARCH 8, 2011
3:49PM EST
3:49PM EST
FEBRUARY 16, 2011
1:33PM EST
Volume grinding to a halt here ahead of FOMC minutes in just under an hour...Oil Services continuing to squeeze on Iranian warship news out this morning keeping S&P green for now, Oil however barely holding the $85 level...relentless strength in Oil Services names over the past several weeks really telling us something, possible significant Oil spike over the $100 level coming later on this year on some sort of supply disruption (maybe outright war in middle east) or maybe some strong M&A activity on its way...really not sure what the issue is just yet, but believe it has much more to do with supply concerns than increasing demand...also believe small part of the rise is likely due to some reallocation out of Gold miners which were big performers last year and into Oil Services which really didnt start performing until September, and also another driver is likely Fed using this sector to drive up S&P and possibly to offset underperformance in financials...note Energy sector has third largest weighting in the S&P behind Financials and Information Tech with XOM having the single biggest weighting in entire S&P with 3.81% and CVX carries the 9th biggest weighting with 1.48%, something to keep in mind while watching the OIH and XLE climb....
1:33PM EST
Volume grinding to a halt here ahead of FOMC minutes in just under an hour...Oil Services continuing to squeeze on Iranian warship news out this morning keeping S&P green for now, Oil however barely holding the $85 level...relentless strength in Oil Services names over the past several weeks really telling us something, possible significant Oil spike over the $100 level coming later on this year on some sort of supply disruption (maybe outright war in middle east) or maybe some strong M&A activity on its way...really not sure what the issue is just yet, but believe it has much more to do with supply concerns than increasing demand...also believe small part of the rise is likely due to some reallocation out of Gold miners which were big performers last year and into Oil Services which really didnt start performing until September, and also another driver is likely Fed using this sector to drive up S&P and possibly to offset underperformance in financials...note Energy sector has third largest weighting in the S&P behind Financials and Information Tech with XOM having the single biggest weighting in entire S&P with 3.81% and CVX carries the 9th biggest weighting with 1.48%, something to keep in mind while watching the OIH and XLE climb....
FEBRUARY 23, 2011
11:09AM EST
With market fully focused on Oil prices and overall market starting to breakdown technically, only real plays out there are energy plays...traders piling into small cap names especially those which were big runners back in 2008 when Oil ran to $147/barrel...names like PDO ROYL MXC FPP BDCO, essentially any company with the world Oil or Energy in its name is seeing a bid, and should Oil continue to push higher these names have potential for parabolic moves similar to what we saw back in 2008
11:09AM EST
With market fully focused on Oil prices and overall market starting to breakdown technically, only real plays out there are energy plays...traders piling into small cap names especially those which were big runners back in 2008 when Oil ran to $147/barrel...names like PDO ROYL MXC FPP BDCO, essentially any company with the world Oil or Energy in its name is seeing a bid, and should Oil continue to push higher these names have potential for parabolic moves similar to what we saw back in 2008
DECEMBER 15, 2010
1:39PM EST
Covered half TLT short here in $90.80s from $104.20, sold half TBT long $40.20s from $31.76 for significant gains (both positions initiated October 5th when we outlined our Q4 2010 Meltup Thesis in equities - see October 5th - 12:33PM entry)....one of our best trades this year, have to take some off the table at these levels
1:39PM EST
Covered half TLT short here in $90.80s from $104.20, sold half TBT long $40.20s from $31.76 for significant gains (both positions initiated October 5th when we outlined our Q4 2010 Meltup Thesis in equities - see October 5th - 12:33PM entry)....one of our best trades this year, have to take some off the table at these levels
1:57PM EST
Covered last half of TLT short at $91.04/ TBT long at $40.07, full profits taken on this Treasury position...may even get long here shortly
Covered last half of TLT short at $91.04/ TBT long at $40.07, full profits taken on this Treasury position...may even get long here shortly
DECEMBER 16, 2010
2:39PM EST
Just took low risk/high reward position in December 39 TBT puts at .06....note these contracts expire tomorrow, willing to risk .06 on possible +$1.00 payout on Treasury surge...oversold technicals in addition to possible bearish news for equities signaled by Dec SPY call activity shows high probability for big move to the upside in Treasuries here near-term...also note Monday gap at $38.06 which is likely target on a momentum shift to the downside in TBT (gap at $93.50 on TLT)
2:39PM EST
Just took low risk/high reward position in December 39 TBT puts at .06....note these contracts expire tomorrow, willing to risk .06 on possible +$1.00 payout on Treasury surge...oversold technicals in addition to possible bearish news for equities signaled by Dec SPY call activity shows high probability for big move to the upside in Treasuries here near-term...also note Monday gap at $38.06 which is likely target on a momentum shift to the downside in TBT (gap at $93.50 on TLT)
DECEMBER 17, 2010
10:27AM EST
Nice bounce in Treasuries this morning with TBT hovering just above $39 putting our December 39 TBT puts very close to trading in the money here (already +200% from .06 entry yesterday)...due to oversold technicals, heavy shorts in Treasuries no reason we cant see a spike to $93s in TLT today (Monday gap at $93.50) which would send our puts soaring...holding onto entire TBT put position here as we're willing to risk the .06 loss on the options for above average probability of .95 payout on TLT spike
10:27AM EST
Nice bounce in Treasuries this morning with TBT hovering just above $39 putting our December 39 TBT puts very close to trading in the money here (already +200% from .06 entry yesterday)...due to oversold technicals, heavy shorts in Treasuries no reason we cant see a spike to $93s in TLT today (Monday gap at $93.50) which would send our puts soaring...holding onto entire TBT put position here as we're willing to risk the .06 loss on the options for above average probability of .95 payout on TLT spike
2:27PM EST
All out December 39 TBT Puts at $1.01-1.05 from .06 entry yesterday for a grand slam overnight profit of 1,600% as $93.50 gap fill target put out yesterday on TLT hit to perfection (see Dec. 16th - 2:39PM entry)....we will continue to hold our long TLT position taken at $91.14 wednesday, along with our TBT short position initiated at $40 as we believe Treasuries have hit a short-term bottom
All out December 39 TBT Puts at $1.01-1.05 from .06 entry yesterday for a grand slam overnight profit of 1,600% as $93.50 gap fill target put out yesterday on TLT hit to perfection (see Dec. 16th - 2:39PM entry)....we will continue to hold our long TLT position taken at $91.14 wednesday, along with our TBT short position initiated at $40 as we believe Treasuries have hit a short-term bottom
NOVEMBER 29, 2010
1:48PM EST
Stepping back and taking a broadbased view of equities we can see continued signs of underlying strength as financials continue to trade green (very strong sign that US-based equities are somewhat isolated from European sovereign debt concerns), high-beta retail names AMZN and AAPL continue to outperform, and Oil Services names continue to see a strong bid...again, no real single sector leading us down, just some broadbased mild risk reduction taking place likely due to blackboxes reacting to dollar strength and overseas weakness...as noted however we continue to view underlying strength in market leaders tech and retail as a signal that these markets are not ready to turnover just yet and are likely to continue to push higher near-term on the back of strength in these two sectors...given trading action thus far expect we're likely to see a strong push higher heading into the close today and/or another strong snapback rally tomorrow...one important aspect to take note of is the fact that US equities have dealt with very significant headlines over the past couple of weeks (China tightening headlines, European sovereign debt headlines, strong dollar rally, etc.), yet the market continues to hover within striking distance of its recent highs with many leadership stocks (AAPL AMZN) trading at or near new highs...this inability of the market to turnover on a significant confluence of negative headwinds not only dictates massive underlying strength (which will ultimately force shorts to cover) but it also produces an environment with reduced headline risk and weaker selling pressure going forward and one highly conducive to rapidly rising stock prices (big negative headlines which had produced high levels of uncertainty now out of the way and risk levels have already been reduced due to extremely negative headlines)...watch for any marginally positive global headlines and/or weaker dollar to send this market higher near-term as supply/demand profile of market now favoring higher prices (weak supply levels due to reduced levels of required risk reduction/high demand due to short covering and further conviction on long side due to shallow pullback realtive to extremely negative headlines)
1:48PM EST
Stepping back and taking a broadbased view of equities we can see continued signs of underlying strength as financials continue to trade green (very strong sign that US-based equities are somewhat isolated from European sovereign debt concerns), high-beta retail names AMZN and AAPL continue to outperform, and Oil Services names continue to see a strong bid...again, no real single sector leading us down, just some broadbased mild risk reduction taking place likely due to blackboxes reacting to dollar strength and overseas weakness...as noted however we continue to view underlying strength in market leaders tech and retail as a signal that these markets are not ready to turnover just yet and are likely to continue to push higher near-term on the back of strength in these two sectors...given trading action thus far expect we're likely to see a strong push higher heading into the close today and/or another strong snapback rally tomorrow...one important aspect to take note of is the fact that US equities have dealt with very significant headlines over the past couple of weeks (China tightening headlines, European sovereign debt headlines, strong dollar rally, etc.), yet the market continues to hover within striking distance of its recent highs with many leadership stocks (AAPL AMZN) trading at or near new highs...this inability of the market to turnover on a significant confluence of negative headwinds not only dictates massive underlying strength (which will ultimately force shorts to cover) but it also produces an environment with reduced headline risk and weaker selling pressure going forward and one highly conducive to rapidly rising stock prices (big negative headlines which had produced high levels of uncertainty now out of the way and risk levels have already been reduced due to extremely negative headlines)...watch for any marginally positive global headlines and/or weaker dollar to send this market higher near-term as supply/demand profile of market now favoring higher prices (weak supply levels due to reduced levels of required risk reduction/high demand due to short covering and further conviction on long side due to shallow pullback realtive to extremely negative headlines)
10:06AM EST
Added to SPY position at $117.80 as S&P should hold its 50-day EMA here at 1174.37...believe retail thesis is still in tact, haven't unloaded a single position into this weakness...believe we have another retail/tech-led squeeze coming this week as shorts surely taking positions into this sell-off and will likely get squeezed this week...expect bounce off 50-day EMA on S&P will bring in technical buy interest as well...European market clearly leading the way lower as it trades down 2.3% now, however continue to believe their sovereign debt issues are mostly isolated to Europe (note US bank stocks GS JPM MS C BAC trading flat to green this morning) and will have little effect on retail spending here in the US...selling pressure strictly coming from blackboxes tied to dollar/overseas indices, however expect underlying theme of consumer spending momentum into year-end to override these concerns near-term
Added to SPY position at $117.80 as S&P should hold its 50-day EMA here at 1174.37...believe retail thesis is still in tact, haven't unloaded a single position into this weakness...believe we have another retail/tech-led squeeze coming this week as shorts surely taking positions into this sell-off and will likely get squeezed this week...expect bounce off 50-day EMA on S&P will bring in technical buy interest as well...European market clearly leading the way lower as it trades down 2.3% now, however continue to believe their sovereign debt issues are mostly isolated to Europe (note US bank stocks GS JPM MS C BAC trading flat to green this morning) and will have little effect on retail spending here in the US...selling pressure strictly coming from blackboxes tied to dollar/overseas indices, however expect underlying theme of consumer spending momentum into year-end to override these concerns near-term
NOVEMBER 30, 2010
3:49PM EST
Big moves across all financial markets today making data rather noisy: Euro -1%, Gold +1%, Oil -1.75%, VIX +7%, Treasuries + 1% earlier, Nasdaq -1%....big standout though is this very big buyer taking in heavy supply in SPYs all day, typically it signals a big up move coming in equities which coincides with technical formation off possible triple bottom on S&P...from what we're seeing we believe we have potential to see a very strong rally off this 1175 level here near-term
3:49PM EST
Big moves across all financial markets today making data rather noisy: Euro -1%, Gold +1%, Oil -1.75%, VIX +7%, Treasuries + 1% earlier, Nasdaq -1%....big standout though is this very big buyer taking in heavy supply in SPYs all day, typically it signals a big up move coming in equities which coincides with technical formation off possible triple bottom on S&P...from what we're seeing we believe we have potential to see a very strong rally off this 1175 level here near-term
2:41PM EST
Buy pressure in SPYs on pullbacks shows very strong accumulation going on likely ahead of a strong up day tomorrow...also high betas held up very well on this pullback over the past 15 minutes...solid triple bottom on the S&P chart at 1175, feels like we're set up for a strong push higher off these levels likely back into 1190s and then onto 1200-1210....big accumulation going on in SPYs
In September Of 2010 we accumulated a basket of 6 Small Cap Stocks REDF KNDI LOCM TZOO REE MMYT we believed would be manipulated by Hedge Funds in order to boost 3rd Quarter and Year-End performance numbers - over the course of the next 8 weeks every single stock soared with REDF exploding +92% From Our Entry, KNDI +122%, REE +135%, RTK +79%, TZOO +78%, LOCM +47% and MMYT +30% click here for specific write-ups
November 1, 2010
VIDEO: Congressional Election/FOMC Preview - Equities, Commodities To Trade Higher On New Lows In Dollar, Treasuries To Continue Downtrend...
VIDEO UPDATES AVAILABLE TO MATRIX ANALYTIX SUBSCRIBERS ONLY
October 29, 2010
Congressional Election/FOMC Preview - Equities,Commodities Set To Breakout On New Lows In Dollar...
In terms of a preview of how we expect next week to play out, we currently see a very nice sense of skepticism in markets that markets will surely sell off on the news, that QE is more than priced in, that the size of the package will surely disappoint, and this is making almost certain that we are going to squeeze markedly higher on the FOMC statement...this skepticism really signals to us that there is still a ton of sidelined money waiting to get in this market which tells us there is still significant upside in markets into year end...in terms of currency, we expect the dollar will almost surely put in a new low shortly after FOMC which will really trigger very strong buy programs in both equities and commodities...in terms of Treasuries, we expect there may be a very short lived pop on the QE announcement however it will be followed by another round of lower lows and the resumption of its downtrend shortly thereafter...in other words, we continue to believe our Q4 2010 Meltup Thesis (see October 5th/6th commentary + video) which highlighted the expectation that the congressional elections and FOMC statement will act is a pivot point to the upside in equities is playing out to perfection, and we would continue to look for any dips to add to equity positions as S&P looks to break past 1200 and head towards its 1220 highs very shortly...we will be providing much more color on our near-term market outlook in our FOMC/Election Preview Video this weekend
October 5, 2010
Color On Q4 2010 Meltup Thesis...
S&P breaking out past 1157 on continued short-covering + Fed liquidity injection through POMO....high betas continue to outperform with BIDU now up over 5%...started initiating short position in bonds going long TBT at $31.76 (Ultrashort Bonds) and short TLT $104.20 as we believe this bond trade is getting ready to unwind significantly over the next several weeks as funds swap out of low-risk assets in favor of higher risk equities and the Fed's second QE package is much smaller than current market expectations...in terms of equities, tons of shorts now trapped in high beta positions after todays gap up, and we have funds who are still extremely underexposed to equities and now extremely nervous as they watch this market take off without them....this is one of the main pillars of our Q4 Meltup Thesis (which we'll be presenting in a video here shortly) that there is still an enormous amount of fund demand which needs to be met ahead of year end especially as markets breakout over major technical levels...remember this is the last quarter of the year, fund managers no longer have the luxury of time to wait and see if rallies are for real or not, there are merely 11 weeks left for funds to produce performance numbers and then the books are closed, statements are sent out, and clients make decisions on whether or not their money was managed well or not...if they believe it hasn't, the money likely moves to a fund which did produce sufficient results, and that manager who was unable to produce heads to the unemployment line...moreover, the smartest money in the market (ie Goldman Sachs) is well aware of this constraint of time and are now certain that if they break markets out over technical levels there will surely be fund buyers willing to buy at those higher prices....this is how many of the most aggressive funds operate..."if we carry out Action A, how certain are we that Outcome B will occur?"...in other words, if we push the S&P past 1157, how certain are we that there will be enough buyers or capital to propel the market to 1175?....its a big game of exploiting your opponents weaknesses and constraints and being able to anticipate your opponents reactions....furthermore, this move to propel markets higher is also in line with the Feds desire to create inflation, create wealth, and create the perception of improved economic conditions heading into a very important holiday season where it is imperative that consumers spend as much money as possible...lastly we believe the November 2nd Congressional Elections results in addition to the FOMC meeting on November 3rd will act as a major pivot point for markets as the looming cloud of Congressional uncertainty passes and the FOMC likely provides further accommodative commentary to propel markets higher...in terms of the Congressional elections the only possible negative outcome would be the Dems controlling both the House and Senate which we view as extremely unlikely...we will be providing more color on our Q4 Meltup Thesis in a video this week, but in the mean time we recommend maintaining a strong long bias, accumulating positions on dips, and we'd be looking at way out of the money December calls on high beta names as well as the indices while looking to short Treasuries
OCTOBER 6, 2010
VIDEO: Q4 2010 Meltup Thesis - Major Supply/Demand Imbalance To Propel S&P Past 1220 High By Year End...
VIDEO UPDATES AVAILABLE TO MATRIX ANALYTIX SUBSCRIBERS ONLY
October 5, 2010
Color On Q4 2010 Meltup Thesis...
S&P breaking out past 1157 on continued short-covering + Fed liquidity injection through POMO....high betas continue to outperform with BIDU now up over 5%...started initiating short position in bonds going long TBT at $31.76 (Ultrashort Bonds) and short TLT $104.20 as we believe this bond trade is getting ready to unwind significantly over the next several weeks as funds swap out of low-risk assets in favor of higher risk equities and the Fed's second QE package is much smaller than current market expectations...in terms of equities, tons of shorts now trapped in high beta positions after todays gap up, and we have funds who are still extremely underexposed to equities and now extremely nervous as they watch this market take off without them....this is one of the main pillars of our Q4 Meltup Thesis (which we'll be presenting in a video here shortly) that there is still an enormous amount of fund demand which needs to be met ahead of year end especially as markets breakout over major technical levels...remember this is the last quarter of the year, fund managers no longer have the luxury of time to wait and see if rallies are for real or not, there are merely 11 weeks left for funds to produce performance numbers and then the books are closed, statements are sent out, and clients make decisions on whether or not their money was managed well or not...if they believe it hasn't, the money likely moves to a fund which did produce sufficient results, and that manager who was unable to produce heads to the unemployment line...moreover, the smartest money in the market (ie Goldman Sachs) is well aware of this constraint of time and are now certain that if they break markets out over technical levels there will surely be fund buyers willing to buy at those higher prices....this is how many of the most aggressive funds operate..."if we carry out Action A, how certain are we that Outcome B will occur?"...in other words, if we push the S&P past 1157, how certain are we that there will be enough buyers or capital to propel the market to 1175?....its a big game of exploiting your opponents weaknesses and constraints and being able to anticipate your opponents reactions....furthermore, this move to propel markets higher is also in line with the Feds desire to create inflation, create wealth, and create the perception of improved economic conditions heading into a very important holiday season where it is imperative that consumers spend as much money as possible...lastly we believe the November 2nd Congressional Elections results in addition to the FOMC meeting on November 3rd will act as a major pivot point for markets as the looming cloud of Congressional uncertainty passes and the FOMC likely provides further accommodative commentary to propel markets higher...in terms of the Congressional elections the only possible negative outcome would be the Dems controlling both the House and Senate which we view as extremely unlikely...we will be providing more color on our Q4 Meltup Thesis in a video this week, but in the mean time we recommend maintaining a strong long bias, accumulating positions on dips, and we'd be looking at way out of the money December calls on high beta names as well as the indices while looking to short Treasuries
September 3, 2010
S&P futures surging with index set to open above 1100 on a better than expected unemployment report (-54K vs expectation of -120K)...real surprise is the better than expected improvement in private nonfarm payrolls where US employers added 67K jobs in the private sector vs an expectation of 44K...while we went heavy long yesterday, believe the macroeconomic data points we've seen this week which have all been unusually positive is the governments attempt to change sentiment throughout the financial system and ultimately invigorate the economy through the artificial perception that things are improving much faster than expected...more importantly this weeks better than expected data forces all the mutual funds and hedge funds who've been off for the past couple weeks back into the market when they return to work following labor day therefore producing significant fund chasing over the next several weeks heading into quarter end...in other words, we don't believe this weeks set of data is entirely "accurate" as previous micro data within manufacturing (ie Philly Fed) and employment (this weeks ADP report) has continued to signal weakness, however we accept the manipulation and will play it from the long side near-term as funds are forced into the market...how high we can go is anyone's guess, 1130 on the S&P maybe even 1150, as fund buying will be significant due to fear of showing strong underperformance for the quarter...expect to see one big meltup next week with megacap industrial, financial, and retail names being bought aggressively by funds producing strong short covering as well
September 20, 2010
Been slowly accumulating some KNDI here in $3.20s throughout the session...stock showing a perfect double bottom at $3 amid alternative energy/electric vehicle momentum (note recent buy interest in AONE, ALTI)...if stock can push above 50-day EMA ($3.31) believe we can see $4s here pretty quickly as small cap momentum is very strong at the moment...stock just waiting to be found...keep an eye on this one next week or so...overall market now starting to grind higher here (now pushing past 1140) as short positions begin to unwind...have potential for a very strong close today as technical breakout we've been calling for is now underway and forcing funds into market...should continue to have a very solid upside bias throughout the week with a bit more velocity to the upside as fund activity likely upticks here ahead of quarter end
September 20, 2010
Rare earth metal plays MCP REE spiking...both hovering just under recent highs (REE- $6.45, MCP - $24.07) with potential for further momentum on breakout...watch these two closely next 2 weeks as hedge funds are in these 2 plays heavy and are likely looking to run these two into quarter end for big performance boosts....initiated position in REE $5.90s stop at $5.50 for potential hedge fund driven momentum into quarter end
September 17, 2010
S&Ps been churning around 1125 for most of the day now, expect us to start ticking up here shortly with a solid move into the close...small caps continue to be extremely active with a lot of beaten up names (COCO UTA) seeing solid gains as hedge funds come in to squeeze shorts off bottoms for high percentage moves...expect LOCM to make its move sometime next week...RTK also starting to breakout past its 50-day EMA, have been seeing a nice bidder in this one, watch for a move to +$1 next week...ALTI also looking primed for a breakout move here shortly...2 additional small caps we have our eye on for new entries are ASTI and KNDI...ASTI showing nice consolidation in low $3s after recent surge, KNDI showing solid double bottom at $3 with potential move to $4s here...small caps the place to be over the next week or so
September 16, 2010
Started accumulating Indian internet portal REDF here $3.20-$3.30...volume levels picking up, believe small cap funds are starting to accumulate Indian stocks here as Indian markets have broken out significantly over the past couple weeks...with such a low float (7.3M) and momentum in the internet portal space (PCLN, MMYT, TZOO, SINA, BIDU) stock is probably the strongest candidate for a hedge fund driven run into quarter end...could easily see a move over $5 (possibly $7s) with momentum
September 14, 2010
Long online travel site TZOO $21.70s for a breakout trade here as stock is approaching its 52-week high $22.19 into the close after 3 days of consolidation and CEO will be presenting at ThinkEquity conference on Thursday at 11AM EST...likely see a move similar to MMYT over the next few sessions...stock is also a strong candidate for hedge fund end of quarter play as float is low (5.5M) and short interest is high (18% of float)
September 10, 2010
Long synthetic fuel + fertilizer producer RTK .77-.78 on possible chart bottom in tandem with 3 presentations next week (Tuesday, Wednesday, Thursday)...doubt company schedules 3 presentations with nothing to say, watch for possible PR monday...also energy and fertilizer sectors active near-term on POT takeover + Enbridge pipeline closure...again hedge funds will be active in small caps to boost performance numbers into quarter end so small caps in general have strong momentum potential next few weeks
September 9, 2010
Banks really leading the way higher today as tuesday's "European debt crisis" shorts are forced to unwind...AAPL also looking very healthy as holiday shopping bid starts to work its way into the market...lots of very solid leadership starting to show up and based on where we are in the calendar (end of quarter fund chasing + positioning for christmas season) theres no reason to think this rally cant continue higher...been accumulating shares of LOCM here in the $3.50s this morning after a website named The Street Sweeper attacked the company and its management sending the shares down to insanely low valuation levels...stock now trades at 4 X next years .88 in earnings, .6 X next years revenue, and moreover they have $12M in net cash...moreover, local search is becoming a very hot sector as seen by the recent success of privately-held Groupon...in any case believe the risk/reward down here at these levels is extremely compelling...if stock can break above $3.85 we should see a very nice run here...also with quarter end coming up, as noted hedge funds are looking for small cap stocks to run for high percentages, and this one looks like a prime candidate especially given the short interest in the stock (11% of float short)
September 8, 2010
Long Indian online travel company MMYT $33 stop $30 on online travel momentum (see PCLN, TZOO, EXPE)...recent IPO makes stock open to manipulation as technical data is somewhat limited...this is the kind of stock hedge funds like to run into quarter end...stock hovering near recent high $36.19, watch for possible breakout over the next week or so
August 25, 2010
Dollar At Risk Of Reversal After Recent Rally As Global Market Forces Look To Ward Off US Deflation...
Near-term we've become focused on dollar behavior as it acts as a very good barometer of global risk aversion....we believe however that its recent rally (which we expected - see August 8th video update) is now at risk of failing due to further quantitative easing measures (which dilutes the value of the dollar)...we moreover believe at this point in time, that global market forces are likely to drive the dollar lower in order to 1) act as an inflationary force here in the US (due to higher import costs) which would help offset some deflationary pressures and 2) it would make US goods and services more competitive and desirable as appreciation of foreign currencies allow global market participants to purchase more goods and services with less money....we strongly believe that global market participants are highly focused on the health of the US economy as our consumption has significant affects on economic activity across all parts of the globe....global market forces are therefore highly likely to produce an environment highly conducive to US growth over the next several months in an effort to avert a global depression
August 4, 2010
Volumeless rally continues although VXX holding up well hovering just under breakeven as demand for puts (especially out of the money) remains suspiciously strong for a third day in a row...very strange in my opinion, options activity really feels like there's gonna be some news hitting markets here....Treasuries have also completely failed to confirm this rally hovering just under their recent highs as equities have broken out technically....this is a rally that Ive been trying to quantify countless times but every analysis continues to signal that it lacks any foundation and conviction with outside markets as well as internals confirming this thesis....its possible that this rally is pricing in an announcement of quantitative easing near-term, however as we noted back on July 16th when we caught wind of markets pricing in further QE measures (see 10:51AM entry), we believed this initial positive reaction (which appears to be taking place ahead of actual announcement) would not hold.....note we have an FOMC meeting August 10th which may prove to be the turning point of this market as QE now appears to be priced in, and Id expect any announcement of QE to be sold off on a "sell the news" type of reaction....also expect that QE has been more than priced into the dollar and would expect dollar to actually rally (or squeeze) on any QE announcement
July 16, 2010
Bull Market In Treasuries To Continue As Markets Signaling Another Round Of Quantitative Easing...
Long TLT once again $100.60s and will be adding to position on dips as it appears to me the market is pricing in yet another round of quantitative easing by the Fed...the recent weakness in the dollar has been rather dramatic as has strength in the Treasury market especially in light of our recent rally in equities and I believe it signals the Fed is set for yet another round of dollar printing which this time may be highly focused on the purchase of Treasuries at the long end of the yield curve in order to drive down long term interest rates even further...equities may get a very short-term pop from this however market participants are well aware that the first round of quantitative easing did little to invigorate the economy and there's no reason to think this round will be much different...market will likely quickly begin to view these measures as a desperate attempt to quell forthcoming strong deflationary pressures which the equity market has yet to fully price in...believe we could easily be looking at a 2.5% yield on the 10-Year, 3.25% Yield on the 30-Year sometime in the next 3-6 months
June 22, 2010
Treasuries look to be on the verge of breaking out of that 1-Month Bullish Pennant we've been eyeing for the past couple weeks...tomorrows FOMC meeting may be the catalyst...continue to hold our long TLT position taken yesterday in the $96.50s and plan on holding through tomorrows FOMC statement as technicals in Treasuries remain bullish and pending breakout looks to be significant...as Treasuries breakout expect to see another strong downleg in equities
July 15, 2010
Note the outperformance in the fertilizer names today (POT MOS MON AGU), one of the 3 sectors we highlighted would likely outperform this quarter due to extremely low valuations (see July 12 - 3:00PM Q2 Earnings Preview)...charts are looking very solid for continued upside, would get long on any pullback
July 12, 2010
Q2 Earnings Preview...
Another yawner of a day with S&P remaining rangebound between 1070-1080 (as expected this morning) on virtually no volume (SPYs not even at 100M yet as we head into final hour of trading)...typically Alcoa earnings are rather meaningless to the market as company always seems to flop earnings due to company specific issues, however with so much earnings uncertainty spread across all sectors, market may react a bit more than usual to Alcoa numbers especially with respect to commodity shares...INTC tomorrow will of course be an even bigger market mover as market gets a solid sense of global PC demand and IT spending...in general expect majority of Q2 earnings reports to come in in-line with pockets of weakness in some form which will however be amplified by extremely conservative Q3 earnings guidance stemming from conservative capital spending due to deflation concerns...expect to see widespread sequential declines in terms of Q2 vs Q3 guidance which will exacerbate concerns over growth due to macroeconomic headwinds...in terms of reactions to earnings reports, funds are looking for very low-risk sectors and stocks with very low multiples (10 X forward earnings or less) and some semblance of certainty to park cash into....any company forecasting uncertainty in terms of second half earnings, will be sold-off, and any company already sporting a high multiple will likely be sold off...also expect to see "good" earnings reports get faded as shorts continue to look for pops to add to positions and funds are in no mood to pay up for stocks as risk aversion is still prevalent and cash levels are very weak...remember funds are likely continuing to see redemptions here near-term as deflation headlines and high unemployment weigh on investor appetite for risk thereby siphoning cash out of equities and into the safe-haven of Treasuries and even money markets...fund bids will therefore be very weak especially for high multiple names...if I had to guess Id say we see pronounced negative reactions in tech, commodity, and retail names (which are very sensitive to deflationary pressure); little to no reaction in financials as those names have already been beaten up yet flattening yield curve, possible double dip in housing, and uncertainty over financial reform continue to pose risk to future earnings; and slightly positive reactions to Oil services names, fertilizers, and possibly defense names as these sectors now sport very low multiples (less than 10 X earnings) and may be seen as safe haven plays near-term
April 27, 2010
Market Behavior Changing, Adjust To Bearish Stance Near And Medium-Term...
S&P working its way off the lows after massive volume + volatility spike on Portugal and Greece downgrades....note as we discussed early morning yesterday (see April 26th 1:40AM EST write-up) that we are now continually pushing to new lows on down days on the S&P relative to key moving averages...in other words, for the bulk of the rally we rarely traded below the 10-day EMA...last week we then began seeing enough selling pressure to not only break below the 10-day EMA, but enough to trade down to the 20-day EMA where we tested and rallied off that level twice....today we are now seeing enough selling pressure to break below the 20-day EMA intraday and are now waiting to see if we can close above it....now even if we are able to rally and close well above the 20-day EMA today, its still extremely important to note that the behavior of this vertical rally in markets (especially with respect to the intensity of sellers) is and has been changing since last week and we need to start adjusting our outlooks near and medium-term to that of a more bearish stance in my opinion...also note money flooding the safe haven of Treasuries as S&P cuts Portugals debt rating, and reduces Greece debt rating to junk status causing major spike in volatility index with respect to equities...TLT already trading 5M in volume vs 3-month average of 3M..also note huge spike in out of the money QQQQ and IWM put volume yesterday...take cover
February 25, 2010
Market Headed To New Highs As Major Buyer Remains Active...
"Mystery Buyer" surfaces yet again to buy the market aggressively in the face of major selling across the board. As we mentioned yesterday, this buyer has been extremely aggressive on the bid since SPY 107, showed up yesterday into the close as the market was about to roll over, and is clearly indicative of either someone with information and/or someone who just wants to take the market higher regardless of any fundamental news. This is a very powerful player in the market and you can actually watch them actively on the SPY bid using Level 2 and Last Sale (Topic #12 "Spotting The Hidden Buyer/Seller" in The Matrix Strategy Trading Course starting next week). As we outlined yesterday, this is a buyer we absolutely need to respect due to the intensity and longevity of the buying pressure he exhibits, and because of today's action/signal we covered our short positions during the final hour for small gains and are now looking to get long as we believe this market is now headed higher...possibly to new highs. The type of action we've seen on this market pullback is extremely similar to the action we saw back in Feb-March 2007 when after a run from DOW 11,000 to 13,000 a severe sell-off in Chinese markets caused the DOW to drop over 400 points in a single day and brought in an enormous amount of shorts into the market believing the market had topped. A couple of months later the DOW was setting new highs and on its way to 14,000. During the course of that sell-off we continued to see a relentless buyer very much like what we are seeing now. Now fundamentally should this market be headed higher? Not in my opinion, but I respect the tape much more than fundamentals or technicals. The action we've seen over the past couple of weeks is clearly indicative of someone accumulating an enormous amount of SPY shares, and we know this is for a reason. Powerful players buying billions of dollars of SPYs or S&P futures over the course of several weeks do not place bets in the markets based on hunches, it is very much based on information or the sheer power to squeeze shorts and take the market higher. Today was a very strong signal that this buyer is relentless on the bid, and will probably be buying aggressively on each and every pullback...this is not the sort of action we like to see when we are holding short positions. Watch for a break of that 1110 level on the S&P, which as we outlined in yesterday's market summary is probably where this buyer wants to take the market.
February 25, 2010
BIDU Headed To $25B Market Cap Or $720 Per Share...
One stock to keep an eye on is BIDU....shorts getting extremely frustrated with this one...stock has held its entire gains and then some since earnings a couple weeks ago (when we called a near-term target of $500-525)...ton of shorts trapped now in the $480-500 level....fundamentally in my opinion this stock still has a ton of upside from here as mkt caps of GOOG and BIDU converge over the medium to long term....GOOGs market cap currently sits at $166B while BIDUs sits at a mere $17.5B....while we don't expect the stock to jolt straight to $50-100B we believe fair value is closer to $25B based on its dominance of the search market in China (~60% market share)....$25B mkt cap = $720/share
November 25, 2009
Market Top, Dollar Bottom Coming...
Dec. 21-24th is when market will top, dollar will bottom imo....short tech/RTH/commodity plays + get long dollar/Treasuries and short gold...January puts optimal as selling in equities will commence into end of Dec and will accelerate significantly in January as funds unwind positions (reverse January Effect since funds already heavily loaded in stocks)...expect an element of panic in January as liquidation takes place....consumer spending likely to contract significantly in first half of 2010 as consumers retighten purse strings following Christmas spending binge...housing demand likely to wane again in 2010 as demand from bottom fishers peters out...downside pressure on home prices will likely resurface, resurrecting concerns over bank balance sheets....expect calls for a new round of stimulus in early 2010 as trepidation over strength and longevity of this jobless economic recovery is brought to the forefront....in the meantime expect this low volume move higher in equities to continue as the invisible hand fattens the pig up one last time for Christmas before slaughter.
September 15, 2008
Equity Market Being Used As Source Of Funds By Financial Institutions...
The stock market is being used as a source of funds right now which is not good....the largest players in the equity market have major major capital issues right now....AIG needs $80 Billion just to survive, that is a HUGE number (Goldmans entire market cap is $53B...they basically need a Goldman and a half) and they are just one major player....sure, institutions and market participants across the financial spectrum have used the equity market as a source of funds for a long time but never have the largest institutions in the financial ecosystem been under this much pressure to raise capital...and never have they experienced the need to raise capital for the ultimate sake of survival...that need to raise capital to meet margin calls in order to survive was usually (for the most part) limited to us the small guy...the market could easily weather that kind of selling pressure as long as the big guys were in there buying our stock on the cheap as we forcibly liquidated our holdings...now the shoe's on the other foot with large institutions joining us aggressively on the ask, which puts us in uncharted waters....liquidation of this magnitude leads to extremely rapid declines in asset prices especially those assets widely held by many large institutions....this rapid deterioration in stock prices ultimately leads to the point where stocks are no longer viewed as representing ownership in fundamentally sound companies but rather as a mere source of funds...a way to raise cash....you sell stock you get cash, thats what institutions need cash.....this is when panic begins to set in, it gets scary and stock markets crash, its when people become fearful of owning stocks as an asset class because of rapidly declining asset prices. after todays action you can tell real fear is developing in the market and people are really JUST starting to get a bit nervous about owning stocks....you're starting to see stocks that were worth $60-70/share go to zero....and these arent just any stocks, they were the biggest balls in the market....people are starting to think about what they own and what its really worth if panic sets in....i mean is it that far fetched to see AAPL selling in the 90s....the big boys could sell that stock off another 40 points down to $100 and funds would still be getting out with a profit...thats how you have to think right now....think about how much fund ownership your stocks have and know that those funds are having major problems and need cash.
May 29, 2008
Price Action In Financials Signals Trouble Looming On The Horizon...While most have been mesmerized by the price action in commodities, emerging markets and energy related plays over the past several weeks, it appears the financials have been making a rather stealthy yet alarming move to the downside. Looking at the 6 month chart of the XLF we notice that somehow we've managed to make our way back toward the lows set in March, and it appears that Lehman (LEH) has been looking ominously weaker than any other financial. Notably, David Einhorn of Greenlight Capital has been publicly parading the analysis behind his Lehman short position saying they are extremely undercapitalized and have essentially hidden $6.5 billion of CDOs on their balance sheet. Furthermore, credit default swaps on Lehman debt have begun rising dramatically over the past several weeks, going from 130 last month to just under 250 now. Merril debt has also spiked to 196. Taking into account these observations, a put position on the XLF as well as LEH seems like a good bet as something is definitely brewing within the financials yet again. If another round of credit woes surface the Fed may need to remain sidelined a bit longer than expected or we may actually begin to hear expectations of further rate cuts which would add further fuel to
the commodity move. Would remain long Oil and Natural Gas, short XLF and LEH, short USD/EUR, and short the DIA here.
March 13, 2008
Big US Bank In Trouble...While we as traders will always be on the outside of this Wall Street banking crisis, we can nevertheless extract enormous amounts of information simply by observing trading patterns. It is just as highly skilled poker players extract all the information they need simply by reading how their opponents bet and react to bets. Notice today that the market supposedly rallied on an S&P report that we were nearing an end to large write-downs, yet the XLF still closed red. If the worst was really behind us we would have surely seen the large banks rally hard off the depressed levels they currently trade at. Even Tuesday's Fed-induced rally failed to move the large banks in any significant manner. Something indeed appears very fishy in the financials...
February 10, 2008
Oil Looks Set To Squeeze Past $100...
I've been watching oil intently now for the past couple months, waiting for the price of the black gold to break down and validate theories of a severe recession. Yet through builds in crude supplies, a meltdown in global markets, bears pounding the table on a US recession, and declines in GDP growth forecasts for China, crude has held up extremely well bouncing off the $86 level multiple times. At this point we have to believe that there are an enormous amount of frustrated shorts trapped in oil. I mean they've thrown everything but the kitchen sink at the commodity, and it refuses to break down technically. So what happens next? Well a short squeeze. Sidelined longs like myself have waited for signals of strength to get long the commodity and play the much more valid thesis of rising inflation. Gold has been on a tear on the heels of this thesis alone (busting through $900 and setting up for a test of $1000), and there's no reason why oil shouldn't join the party now after flexing its technical muscles. All the signs of rising inflation are firmly in place with the US dollar continuing to weaken, the yield curve continuing to steepen, and the Fed signaling that inflation fighting has taken a clear back seat to stimulating a lethargic economy. Couple a backdrop of rising inflation, strong technicals, and a hefty short position, with a dose of rising geopolitical tension in Nigeria and Venezuela and it appears we are setting up for a solid squeeze here. Watch for slight resistance at the $96 and $100 levels...but once $100 falls, watch for the squeeze to pick up in intensity sending oil to $107-110 quick.
Buy pressure in SPYs on pullbacks shows very strong accumulation going on likely ahead of a strong up day tomorrow...also high betas held up very well on this pullback over the past 15 minutes...solid triple bottom on the S&P chart at 1175, feels like we're set up for a strong push higher off these levels likely back into 1190s and then onto 1200-1210....big accumulation going on in SPYs
In September Of 2010 we accumulated a basket of 6 Small Cap Stocks REDF KNDI LOCM TZOO REE MMYT we believed would be manipulated by Hedge Funds in order to boost 3rd Quarter and Year-End performance numbers - over the course of the next 8 weeks every single stock soared with REDF exploding +92% From Our Entry, KNDI +122%, REE +135%, RTK +79%, TZOO +78%, LOCM +47% and MMYT +30% click here for specific write-ups
While Markets Remained Extremely Nervous Heading Into The November 2010 Congressional Elections And The Uncertainty Over The Size Of The QE Package Set To Be Unveiled At the November 3rd FOMC Meeting, We Predicted In Our October 5th Q4 2010 Meltup Thesis And Once Again 2 Days Prior To These Events That Markets Would Use These 2 Events As A Major Pivot Point To The Upside Which Would Send Both Commodities And Equities To New Highs, And The Dollar And Treasuries To New Lows...The Day After The FOMC Meeting The S&P Broke Out To New Highs, Gold And Oil Exploded On New Lows In The Dollar, And Treasuries Cratered To New Multi-Month Lows
November 1, 2010
VIDEO: Congressional Election/FOMC Preview - Equities, Commodities To Trade Higher On New Lows In Dollar, Treasuries To Continue Downtrend...
VIDEO UPDATES AVAILABLE TO MATRIX ANALYTIX SUBSCRIBERS ONLY
October 29, 2010
Congressional Election/FOMC Preview - Equities,Commodities Set To Breakout On New Lows In Dollar...
In terms of a preview of how we expect next week to play out, we currently see a very nice sense of skepticism in markets that markets will surely sell off on the news, that QE is more than priced in, that the size of the package will surely disappoint, and this is making almost certain that we are going to squeeze markedly higher on the FOMC statement...this skepticism really signals to us that there is still a ton of sidelined money waiting to get in this market which tells us there is still significant upside in markets into year end...in terms of currency, we expect the dollar will almost surely put in a new low shortly after FOMC which will really trigger very strong buy programs in both equities and commodities...in terms of Treasuries, we expect there may be a very short lived pop on the QE announcement however it will be followed by another round of lower lows and the resumption of its downtrend shortly thereafter...in other words, we continue to believe our Q4 2010 Meltup Thesis (see October 5th/6th commentary + video) which highlighted the expectation that the congressional elections and FOMC statement will act is a pivot point to the upside in equities is playing out to perfection, and we would continue to look for any dips to add to equity positions as S&P looks to break past 1200 and head towards its 1220 highs very shortly...we will be providing much more color on our near-term market outlook in our FOMC/Election Preview Video this weekend
October 5, 2010
Color On Q4 2010 Meltup Thesis...
S&P breaking out past 1157 on continued short-covering + Fed liquidity injection through POMO....high betas continue to outperform with BIDU now up over 5%...started initiating short position in bonds going long TBT at $31.76 (Ultrashort Bonds) and short TLT $104.20 as we believe this bond trade is getting ready to unwind significantly over the next several weeks as funds swap out of low-risk assets in favor of higher risk equities and the Fed's second QE package is much smaller than current market expectations...in terms of equities, tons of shorts now trapped in high beta positions after todays gap up, and we have funds who are still extremely underexposed to equities and now extremely nervous as they watch this market take off without them....this is one of the main pillars of our Q4 Meltup Thesis (which we'll be presenting in a video here shortly) that there is still an enormous amount of fund demand which needs to be met ahead of year end especially as markets breakout over major technical levels...remember this is the last quarter of the year, fund managers no longer have the luxury of time to wait and see if rallies are for real or not, there are merely 11 weeks left for funds to produce performance numbers and then the books are closed, statements are sent out, and clients make decisions on whether or not their money was managed well or not...if they believe it hasn't, the money likely moves to a fund which did produce sufficient results, and that manager who was unable to produce heads to the unemployment line...moreover, the smartest money in the market (ie Goldman Sachs) is well aware of this constraint of time and are now certain that if they break markets out over technical levels there will surely be fund buyers willing to buy at those higher prices....this is how many of the most aggressive funds operate..."if we carry out Action A, how certain are we that Outcome B will occur?"...in other words, if we push the S&P past 1157, how certain are we that there will be enough buyers or capital to propel the market to 1175?....its a big game of exploiting your opponents weaknesses and constraints and being able to anticipate your opponents reactions....furthermore, this move to propel markets higher is also in line with the Feds desire to create inflation, create wealth, and create the perception of improved economic conditions heading into a very important holiday season where it is imperative that consumers spend as much money as possible...lastly we believe the November 2nd Congressional Elections results in addition to the FOMC meeting on November 3rd will act as a major pivot point for markets as the looming cloud of Congressional uncertainty passes and the FOMC likely provides further accommodative commentary to propel markets higher...in terms of the Congressional elections the only possible negative outcome would be the Dems controlling both the House and Senate which we view as extremely unlikely...we will be providing more color on our Q4 Meltup Thesis in a video this week, but in the mean time we recommend maintaining a strong long bias, accumulating positions on dips, and we'd be looking at way out of the money December calls on high beta names as well as the indices while looking to short Treasuries
After A Long Period Of Volatility In Markets, We Began Getting Aggressively Long Stocks On September 2, 2010 Believing Equities Had Finally Bottomed And Were Set To Go On An Epic Run Pushing The S&P Past Its 1220 Highs Due To A Major Supply/Demand Imbalance And A Calendar Trade Which Would Force Funds Into Markets...8 Weeks Later The S&P Hit A New High
OCTOBER 6, 2010
VIDEO: Q4 2010 Meltup Thesis - Major Supply/Demand Imbalance To Propel S&P Past 1220 High By Year End...
VIDEO UPDATES AVAILABLE TO MATRIX ANALYTIX SUBSCRIBERS ONLY
October 5, 2010
Color On Q4 2010 Meltup Thesis...
S&P breaking out past 1157 on continued short-covering + Fed liquidity injection through POMO....high betas continue to outperform with BIDU now up over 5%...started initiating short position in bonds going long TBT at $31.76 (Ultrashort Bonds) and short TLT $104.20 as we believe this bond trade is getting ready to unwind significantly over the next several weeks as funds swap out of low-risk assets in favor of higher risk equities and the Fed's second QE package is much smaller than current market expectations...in terms of equities, tons of shorts now trapped in high beta positions after todays gap up, and we have funds who are still extremely underexposed to equities and now extremely nervous as they watch this market take off without them....this is one of the main pillars of our Q4 Meltup Thesis (which we'll be presenting in a video here shortly) that there is still an enormous amount of fund demand which needs to be met ahead of year end especially as markets breakout over major technical levels...remember this is the last quarter of the year, fund managers no longer have the luxury of time to wait and see if rallies are for real or not, there are merely 11 weeks left for funds to produce performance numbers and then the books are closed, statements are sent out, and clients make decisions on whether or not their money was managed well or not...if they believe it hasn't, the money likely moves to a fund which did produce sufficient results, and that manager who was unable to produce heads to the unemployment line...moreover, the smartest money in the market (ie Goldman Sachs) is well aware of this constraint of time and are now certain that if they break markets out over technical levels there will surely be fund buyers willing to buy at those higher prices....this is how many of the most aggressive funds operate..."if we carry out Action A, how certain are we that Outcome B will occur?"...in other words, if we push the S&P past 1157, how certain are we that there will be enough buyers or capital to propel the market to 1175?....its a big game of exploiting your opponents weaknesses and constraints and being able to anticipate your opponents reactions....furthermore, this move to propel markets higher is also in line with the Feds desire to create inflation, create wealth, and create the perception of improved economic conditions heading into a very important holiday season where it is imperative that consumers spend as much money as possible...lastly we believe the November 2nd Congressional Elections results in addition to the FOMC meeting on November 3rd will act as a major pivot point for markets as the looming cloud of Congressional uncertainty passes and the FOMC likely provides further accommodative commentary to propel markets higher...in terms of the Congressional elections the only possible negative outcome would be the Dems controlling both the House and Senate which we view as extremely unlikely...we will be providing more color on our Q4 Meltup Thesis in a video this week, but in the mean time we recommend maintaining a strong long bias, accumulating positions on dips, and we'd be looking at way out of the money December calls on high beta names as well as the indices while looking to short Treasuries
September 3, 2010
S&P futures surging with index set to open above 1100 on a better than expected unemployment report (-54K vs expectation of -120K)...real surprise is the better than expected improvement in private nonfarm payrolls where US employers added 67K jobs in the private sector vs an expectation of 44K...while we went heavy long yesterday, believe the macroeconomic data points we've seen this week which have all been unusually positive is the governments attempt to change sentiment throughout the financial system and ultimately invigorate the economy through the artificial perception that things are improving much faster than expected...more importantly this weeks better than expected data forces all the mutual funds and hedge funds who've been off for the past couple weeks back into the market when they return to work following labor day therefore producing significant fund chasing over the next several weeks heading into quarter end...in other words, we don't believe this weeks set of data is entirely "accurate" as previous micro data within manufacturing (ie Philly Fed) and employment (this weeks ADP report) has continued to signal weakness, however we accept the manipulation and will play it from the long side near-term as funds are forced into the market...how high we can go is anyone's guess, 1130 on the S&P maybe even 1150, as fund buying will be significant due to fear of showing strong underperformance for the quarter...expect to see one big meltup next week with megacap industrial, financial, and retail names being bought aggressively by funds producing strong short covering as well
In September Of 2010 We Accumulated A Basket Of 6 Small Cap Stocks REDF KNDI LOCM TZOO REE MMYT We Believed Would Be Manipulated By Hedge Funds In Order To Boost 3rd Quarter And Year-End Performance Numbers - Over The Course Of The Next 8 Weeks Every Single Stock Soared With REDF Exploding +92% From Our Entry, KNDI +122%, REE +135%, RTK +79%, TZOO +78%, LOCM +47% and MMYT +30%
September 20, 2010
Been slowly accumulating some KNDI here in $3.20s throughout the session...stock showing a perfect double bottom at $3 amid alternative energy/electric vehicle momentum (note recent buy interest in AONE, ALTI)...if stock can push above 50-day EMA ($3.31) believe we can see $4s here pretty quickly as small cap momentum is very strong at the moment...stock just waiting to be found...keep an eye on this one next week or so...overall market now starting to grind higher here (now pushing past 1140) as short positions begin to unwind...have potential for a very strong close today as technical breakout we've been calling for is now underway and forcing funds into market...should continue to have a very solid upside bias throughout the week with a bit more velocity to the upside as fund activity likely upticks here ahead of quarter end
September 20, 2010
Rare earth metal plays MCP REE spiking...both hovering just under recent highs (REE- $6.45, MCP - $24.07) with potential for further momentum on breakout...watch these two closely next 2 weeks as hedge funds are in these 2 plays heavy and are likely looking to run these two into quarter end for big performance boosts....initiated position in REE $5.90s stop at $5.50 for potential hedge fund driven momentum into quarter end
September 17, 2010
S&Ps been churning around 1125 for most of the day now, expect us to start ticking up here shortly with a solid move into the close...small caps continue to be extremely active with a lot of beaten up names (COCO UTA) seeing solid gains as hedge funds come in to squeeze shorts off bottoms for high percentage moves...expect LOCM to make its move sometime next week...RTK also starting to breakout past its 50-day EMA, have been seeing a nice bidder in this one, watch for a move to +$1 next week...ALTI also looking primed for a breakout move here shortly...2 additional small caps we have our eye on for new entries are ASTI and KNDI...ASTI showing nice consolidation in low $3s after recent surge, KNDI showing solid double bottom at $3 with potential move to $4s here...small caps the place to be over the next week or so
September 16, 2010
Started accumulating Indian internet portal REDF here $3.20-$3.30...volume levels picking up, believe small cap funds are starting to accumulate Indian stocks here as Indian markets have broken out significantly over the past couple weeks...with such a low float (7.3M) and momentum in the internet portal space (PCLN, MMYT, TZOO, SINA, BIDU) stock is probably the strongest candidate for a hedge fund driven run into quarter end...could easily see a move over $5 (possibly $7s) with momentum
September 14, 2010
Long online travel site TZOO $21.70s for a breakout trade here as stock is approaching its 52-week high $22.19 into the close after 3 days of consolidation and CEO will be presenting at ThinkEquity conference on Thursday at 11AM EST...likely see a move similar to MMYT over the next few sessions...stock is also a strong candidate for hedge fund end of quarter play as float is low (5.5M) and short interest is high (18% of float)
September 10, 2010
Long synthetic fuel + fertilizer producer RTK .77-.78 on possible chart bottom in tandem with 3 presentations next week (Tuesday, Wednesday, Thursday)...doubt company schedules 3 presentations with nothing to say, watch for possible PR monday...also energy and fertilizer sectors active near-term on POT takeover + Enbridge pipeline closure...again hedge funds will be active in small caps to boost performance numbers into quarter end so small caps in general have strong momentum potential next few weeks
September 9, 2010
Banks really leading the way higher today as tuesday's "European debt crisis" shorts are forced to unwind...AAPL also looking very healthy as holiday shopping bid starts to work its way into the market...lots of very solid leadership starting to show up and based on where we are in the calendar (end of quarter fund chasing + positioning for christmas season) theres no reason to think this rally cant continue higher...been accumulating shares of LOCM here in the $3.50s this morning after a website named The Street Sweeper attacked the company and its management sending the shares down to insanely low valuation levels...stock now trades at 4 X next years .88 in earnings, .6 X next years revenue, and moreover they have $12M in net cash...moreover, local search is becoming a very hot sector as seen by the recent success of privately-held Groupon...in any case believe the risk/reward down here at these levels is extremely compelling...if stock can break above $3.85 we should see a very nice run here...also with quarter end coming up, as noted hedge funds are looking for small cap stocks to run for high percentages, and this one looks like a prime candidate especially given the short interest in the stock (11% of float short)
September 8, 2010
Long Indian online travel company MMYT $33 stop $30 on online travel momentum (see PCLN, TZOO, EXPE)...recent IPO makes stock open to manipulation as technical data is somewhat limited...this is the kind of stock hedge funds like to run into quarter end...stock hovering near recent high $36.19, watch for possible breakout over the next week or so
After Calling An Exact Bottom In The Dollar And Top In Equities In Early August, We Followed It By Calling The Dollars Exact Top Believing It Was Getting Ready To Reverse Course Yet Again And Resume Its Downward Spiral In An Effort To Produce Domestic Inflation And An Environment Highly Conducive To US Growth...8 Weeks Later The Dollar Had Declined By Over 8% And The S&P Had Rallied Nearly 15% Off Its Bottom
August 25, 2010
Dollar At Risk Of Reversal After Recent Rally As Global Market Forces Look To Ward Off US Deflation...
Near-term we've become focused on dollar behavior as it acts as a very good barometer of global risk aversion....we believe however that its recent rally (which we expected - see August 8th video update) is now at risk of failing due to further quantitative easing measures (which dilutes the value of the dollar)...we moreover believe at this point in time, that global market forces are likely to drive the dollar lower in order to 1) act as an inflationary force here in the US (due to higher import costs) which would help offset some deflationary pressures and 2) it would make US goods and services more competitive and desirable as appreciation of foreign currencies allow global market participants to purchase more goods and services with less money....we strongly believe that global market participants are highly focused on the health of the US economy as our consumption has significant affects on economic activity across all parts of the globe....global market forces are therefore highly likely to produce an environment highly conducive to US growth over the next several months in an effort to avert a global depression
August 4, 2010
Volumeless rally continues although VXX holding up well hovering just under breakeven as demand for puts (especially out of the money) remains suspiciously strong for a third day in a row...very strange in my opinion, options activity really feels like there's gonna be some news hitting markets here....Treasuries have also completely failed to confirm this rally hovering just under their recent highs as equities have broken out technically....this is a rally that Ive been trying to quantify countless times but every analysis continues to signal that it lacks any foundation and conviction with outside markets as well as internals confirming this thesis....its possible that this rally is pricing in an announcement of quantitative easing near-term, however as we noted back on July 16th when we caught wind of markets pricing in further QE measures (see 10:51AM entry), we believed this initial positive reaction (which appears to be taking place ahead of actual announcement) would not hold.....note we have an FOMC meeting August 10th which may prove to be the turning point of this market as QE now appears to be priced in, and Id expect any announcement of QE to be sold off on a "sell the news" type of reaction....also expect that QE has been more than priced into the dollar and would expect dollar to actually rally (or squeeze) on any QE announcement
After Accumulating A Major Long Position In Treasuries Beginning In June 2010, We Spotted Unusual Activity In Financial Markets Signaling The Fed Was About To Embark On Another Round Of Quantitative Easing Specifically Targeted At The Purchase Of Treasuries At The Long End Of The Yield Curve...Several Weeks Later The Fed Announced An Expansion Of Their QE Package Sending Treasuries To Multi-Year Highs
July 16, 2010
Bull Market In Treasuries To Continue As Markets Signaling Another Round Of Quantitative Easing...
Long TLT once again $100.60s and will be adding to position on dips as it appears to me the market is pricing in yet another round of quantitative easing by the Fed...the recent weakness in the dollar has been rather dramatic as has strength in the Treasury market especially in light of our recent rally in equities and I believe it signals the Fed is set for yet another round of dollar printing which this time may be highly focused on the purchase of Treasuries at the long end of the yield curve in order to drive down long term interest rates even further...equities may get a very short-term pop from this however market participants are well aware that the first round of quantitative easing did little to invigorate the economy and there's no reason to think this round will be much different...market will likely quickly begin to view these measures as a desperate attempt to quell forthcoming strong deflationary pressures which the equity market has yet to fully price in...believe we could easily be looking at a 2.5% yield on the 10-Year, 3.25% Yield on the 30-Year sometime in the next 3-6 months
June 22, 2010
Treasuries look to be on the verge of breaking out of that 1-Month Bullish Pennant we've been eyeing for the past couple weeks...tomorrows FOMC meeting may be the catalyst...continue to hold our long TLT position taken yesterday in the $96.50s and plan on holding through tomorrows FOMC statement as technicals in Treasuries remain bullish and pending breakout looks to be significant...as Treasuries breakout expect to see another strong downleg in equities
In Our Q2 2010 Earnings Preview We Highlighted Agriculture Stocks As One Of Three Sectors Which Would Likely Outperform During The Quarter And Recommended Getting Long POT MOS MON And AGU On Any Pullback...4 Weeks Later A Hostile Bid For POT By BHP Sent Agriculture Shares Skyrocketing
July 15, 2010
Note the outperformance in the fertilizer names today (POT MOS MON AGU), one of the 3 sectors we highlighted would likely outperform this quarter due to extremely low valuations (see July 12 - 3:00PM Q2 Earnings Preview)...charts are looking very solid for continued upside, would get long on any pullback
July 12, 2010
Q2 Earnings Preview...
Another yawner of a day with S&P remaining rangebound between 1070-1080 (as expected this morning) on virtually no volume (SPYs not even at 100M yet as we head into final hour of trading)...typically Alcoa earnings are rather meaningless to the market as company always seems to flop earnings due to company specific issues, however with so much earnings uncertainty spread across all sectors, market may react a bit more than usual to Alcoa numbers especially with respect to commodity shares...INTC tomorrow will of course be an even bigger market mover as market gets a solid sense of global PC demand and IT spending...in general expect majority of Q2 earnings reports to come in in-line with pockets of weakness in some form which will however be amplified by extremely conservative Q3 earnings guidance stemming from conservative capital spending due to deflation concerns...expect to see widespread sequential declines in terms of Q2 vs Q3 guidance which will exacerbate concerns over growth due to macroeconomic headwinds...in terms of reactions to earnings reports, funds are looking for very low-risk sectors and stocks with very low multiples (10 X forward earnings or less) and some semblance of certainty to park cash into....any company forecasting uncertainty in terms of second half earnings, will be sold-off, and any company already sporting a high multiple will likely be sold off...also expect to see "good" earnings reports get faded as shorts continue to look for pops to add to positions and funds are in no mood to pay up for stocks as risk aversion is still prevalent and cash levels are very weak...remember funds are likely continuing to see redemptions here near-term as deflation headlines and high unemployment weigh on investor appetite for risk thereby siphoning cash out of equities and into the safe-haven of Treasuries and even money markets...fund bids will therefore be very weak especially for high multiple names...if I had to guess Id say we see pronounced negative reactions in tech, commodity, and retail names (which are very sensitive to deflationary pressure); little to no reaction in financials as those names have already been beaten up yet flattening yield curve, possible double dip in housing, and uncertainty over financial reform continue to pose risk to future earnings; and slightly positive reactions to Oil services names, fertilizers, and possibly defense names as these sectors now sport very low multiples (less than 10 X earnings) and may be seen as safe haven plays near-term
After Spotting A Massive Buyer In S&P Futures In February 2010 Signaling New Highs In Markets, We Noted A Significant Change In Market Behavior During The Last Week Of April And Recommended Adjusting To A Bearish Position Near And Medium-Term....Days Later The Market Began One Of Its Most Treacherous Declines In Recent History Free-Falling More Than 12% In Just A Few Sessions
April 27, 2010
Market Behavior Changing, Adjust To Bearish Stance Near And Medium-Term...
S&P working its way off the lows after massive volume + volatility spike on Portugal and Greece downgrades....note as we discussed early morning yesterday (see April 26th 1:40AM EST write-up) that we are now continually pushing to new lows on down days on the S&P relative to key moving averages...in other words, for the bulk of the rally we rarely traded below the 10-day EMA...last week we then began seeing enough selling pressure to not only break below the 10-day EMA, but enough to trade down to the 20-day EMA where we tested and rallied off that level twice....today we are now seeing enough selling pressure to break below the 20-day EMA intraday and are now waiting to see if we can close above it....now even if we are able to rally and close well above the 20-day EMA today, its still extremely important to note that the behavior of this vertical rally in markets (especially with respect to the intensity of sellers) is and has been changing since last week and we need to start adjusting our outlooks near and medium-term to that of a more bearish stance in my opinion...also note money flooding the safe haven of Treasuries as S&P cuts Portugals debt rating, and reduces Greece debt rating to junk status causing major spike in volatility index with respect to equities...TLT already trading 5M in volume vs 3-month average of 3M..also note huge spike in out of the money QQQQ and IWM put volume yesterday...take cover
In February of 2010 At S&P 1102 We Accurately Spotted A Massive Buyer In S&P Futures Signaling Markets Would Confound Short Sellers And Head To New Highs...From That Point Forward The S&P Went On A Relentless Tear Hitting 1220 In A Matter Of Weeks
February 25, 2010
Market Headed To New Highs As Major Buyer Remains Active...
"Mystery Buyer" surfaces yet again to buy the market aggressively in the face of major selling across the board. As we mentioned yesterday, this buyer has been extremely aggressive on the bid since SPY 107, showed up yesterday into the close as the market was about to roll over, and is clearly indicative of either someone with information and/or someone who just wants to take the market higher regardless of any fundamental news. This is a very powerful player in the market and you can actually watch them actively on the SPY bid using Level 2 and Last Sale (Topic #12 "Spotting The Hidden Buyer/Seller" in The Matrix Strategy Trading Course starting next week). As we outlined yesterday, this is a buyer we absolutely need to respect due to the intensity and longevity of the buying pressure he exhibits, and because of today's action/signal we covered our short positions during the final hour for small gains and are now looking to get long as we believe this market is now headed higher...possibly to new highs. The type of action we've seen on this market pullback is extremely similar to the action we saw back in Feb-March 2007 when after a run from DOW 11,000 to 13,000 a severe sell-off in Chinese markets caused the DOW to drop over 400 points in a single day and brought in an enormous amount of shorts into the market believing the market had topped. A couple of months later the DOW was setting new highs and on its way to 14,000. During the course of that sell-off we continued to see a relentless buyer very much like what we are seeing now. Now fundamentally should this market be headed higher? Not in my opinion, but I respect the tape much more than fundamentals or technicals. The action we've seen over the past couple of weeks is clearly indicative of someone accumulating an enormous amount of SPY shares, and we know this is for a reason. Powerful players buying billions of dollars of SPYs or S&P futures over the course of several weeks do not place bets in the markets based on hunches, it is very much based on information or the sheer power to squeeze shorts and take the market higher. Today was a very strong signal that this buyer is relentless on the bid, and will probably be buying aggressively on each and every pullback...this is not the sort of action we like to see when we are holding short positions. Watch for a break of that 1110 level on the S&P, which as we outlined in yesterday's market summary is probably where this buyer wants to take the market.
In February of 2010 With BIDU Trading In The High $400s, We Put A $720 Target On The Stock Believing The Company Was Worth $25 Billion Based On Current Technical And Fundamental Data...8 Weeks Later The Stock Hit A 52-Week High Of $718 On Blowout Earnings
February 25, 2010
BIDU Headed To $25B Market Cap Or $720 Per Share...
One stock to keep an eye on is BIDU....shorts getting extremely frustrated with this one...stock has held its entire gains and then some since earnings a couple weeks ago (when we called a near-term target of $500-525)...ton of shorts trapped now in the $480-500 level....fundamentally in my opinion this stock still has a ton of upside from here as mkt caps of GOOG and BIDU converge over the medium to long term....GOOGs market cap currently sits at $166B while BIDUs sits at a mere $17.5B....while we don't expect the stock to jolt straight to $50-100B we believe fair value is closer to $25B based on its dominance of the search market in China (~60% market share)....$25B mkt cap = $720/share
In December of 2009 We Accurately Predicted Funds Would Pull Out of Gold And Begin Buying the US Dollar Aggressively
December 4, 2009
Watch For Short Squeeze In USD...
Question to think about, where's all this Gold money gonna go when it comes out?
I say it goes straight into dollar buying...expect a significant and relatively lengthy short squeeze in the USD sometime in the next 6 weeks
http://stockcharts.com/h-sc/ui?s=$USD&p=D&yr=3&mn=0&dy=0&id=p04727332209
Note major call buying going on across the board in the December/January/March/June UUP contracts as UUP trades up on 3 X avg volume...also note perfect double bottom at $22 on the 2-year UUP chart
http://finance.yahoo.com/q/op?s=UUP&m=2010-01
http://stockcharts.com/h-sc/ui?s=UUP&p=D&yr=2&mn=0&dy=0&id=p04727332209
First stops on the USD Index are those gaps at 78, 82, and 84
With so many shorts piled in and money coming out of gold, that 78 gap will fill very quickly on a reversal
Watch For Short Squeeze In USD...
Question to think about, where's all this Gold money gonna go when it comes out?
I say it goes straight into dollar buying...expect a significant and relatively lengthy short squeeze in the USD sometime in the next 6 weeks
http://stockcharts.com/h-sc/ui?s=$USD&p=D&yr=3&mn=0&dy=0&id=p04727332209
Note major call buying going on across the board in the December/January/March/June UUP contracts as UUP trades up on 3 X avg volume...also note perfect double bottom at $22 on the 2-year UUP chart
http://finance.yahoo.com/q/op?s=UUP&m=2010-01
http://stockcharts.com/h-sc/ui?s=UUP&p=D&yr=2&mn=0&dy=0&id=p04727332209
First stops on the USD Index are those gaps at 78, 82, and 84
With so many shorts piled in and money coming out of gold, that 78 gap will fill very quickly on a reversal
In November of 2009 We Predicted That Shortly After Christmas The Equity Market Would Top, Tech and Commodity Shares Would Be Crushed and the Dollar Would Bottom and Begin Its Trek Higher
November 25, 2009
Market Top, Dollar Bottom Coming...
Dec. 21-24th is when market will top, dollar will bottom imo....short tech/RTH/commodity plays + get long dollar/Treasuries and short gold...January puts optimal as selling in equities will commence into end of Dec and will accelerate significantly in January as funds unwind positions (reverse January Effect since funds already heavily loaded in stocks)...expect an element of panic in January as liquidation takes place....consumer spending likely to contract significantly in first half of 2010 as consumers retighten purse strings following Christmas spending binge...housing demand likely to wane again in 2010 as demand from bottom fishers peters out...downside pressure on home prices will likely resurface, resurrecting concerns over bank balance sheets....expect calls for a new round of stimulus in early 2010 as trepidation over strength and longevity of this jobless economic recovery is brought to the forefront....in the meantime expect this low volume move higher in equities to continue as the invisible hand fattens the pig up one last time for Christmas before slaughter.
In July of 2009 We Accurately Predicted Gold Would Finally Break Through The $1,000 Level Spurred By A Surge In Fund Buying
July 31, 2009
Gold To Breakout Above $1,000...
Just took my GLD position...watch for Dollar to make new lows next week, and Gold to take off towards that $1,000 level again....I believe we are very close to finally breaking that $1,000 level....note the massive 1.5 year inverted head and shoulders on the 3-year GLD chart...also note that we have pretty much been trading right above $900 since almost the beginning of the year....a nice base has been set for us to launch off of....funds are also in major asset allocation mode, so the fund money is flowing...I think the time has come for Gold imo, watch it closely near term
November 5, 2009 (Follow-Up)
200 ton India buy from IMF at $1,045/oz is a MAJOR turning point for gold.....huge signal that central banks are serious about diversifying out of the dollar and into gold long term....fact that the the 200 tons went at market prices signals there were multiple central bank bidders for that 200 tons, otherwise India wouldve surely been able to negotiate a lower price.....next 200 tons probably goes to China at even higher prices....
Golds been greenlit for much higher prices....next stop is probably somewhere in the $1200-1275 range imo
Gold To Breakout Above $1,000...
Just took my GLD position...watch for Dollar to make new lows next week, and Gold to take off towards that $1,000 level again....I believe we are very close to finally breaking that $1,000 level....note the massive 1.5 year inverted head and shoulders on the 3-year GLD chart...also note that we have pretty much been trading right above $900 since almost the beginning of the year....a nice base has been set for us to launch off of....funds are also in major asset allocation mode, so the fund money is flowing...I think the time has come for Gold imo, watch it closely near term
November 5, 2009 (Follow-Up)
200 ton India buy from IMF at $1,045/oz is a MAJOR turning point for gold.....huge signal that central banks are serious about diversifying out of the dollar and into gold long term....fact that the the 200 tons went at market prices signals there were multiple central bank bidders for that 200 tons, otherwise India wouldve surely been able to negotiate a lower price.....next 200 tons probably goes to China at even higher prices....
Golds been greenlit for much higher prices....next stop is probably somewhere in the $1200-1275 range imo
In July of 2009, With AAPL In The $150s, AMZN In The $80s And GMCR In The $60s We Accurately Predicted These 3 Stocks Would Be The Most Sought After By Funds Into Year-End...AAPL Hit $213, AMZN $145, and GMCR $82 In December
July 21, 2009
AMZN, AAPL, GMCR This Years Christmas Winners...
Gonna put this out there early, AMZN and GMCR will be this years big Christmas winners/runners imo....both the Kindle and Green Mountain's K-Cup Brewers will see tremendous sales this holiday season imo...watch for buying in these stocks now as funds are in the process of positioning themselves for Christmas already
Targets:
AMZN $120-130
GMCR +$100 (that 40% short interest could propel this one even higher maybe $120....when i think about their product and what ive heard about it, it wouldnt surprise me if everyone had this in their home eventually)
AAPL will also do really well this Christmas (but we all already knew that)....AAPL will certainly retest and possibly break that $200 level by January 2010 imo....fund managers can sleep well with this one at night knowing that in one of the worst consumer spending recessions ever and -6% GDP they were still able to churn out +$1 in EPS every quarter....how much are they gonna earn at 0% GDP or at +3%GDP eventually?
AMZN, AAPL, GMCR This Years Christmas Winners...
Gonna put this out there early, AMZN and GMCR will be this years big Christmas winners/runners imo....both the Kindle and Green Mountain's K-Cup Brewers will see tremendous sales this holiday season imo...watch for buying in these stocks now as funds are in the process of positioning themselves for Christmas already
Targets:
AMZN $120-130
GMCR +$100 (that 40% short interest could propel this one even higher maybe $120....when i think about their product and what ive heard about it, it wouldnt surprise me if everyone had this in their home eventually)
AAPL will also do really well this Christmas (but we all already knew that)....AAPL will certainly retest and possibly break that $200 level by January 2010 imo....fund managers can sleep well with this one at night knowing that in one of the worst consumer spending recessions ever and -6% GDP they were still able to churn out +$1 in EPS every quarter....how much are they gonna earn at 0% GDP or at +3%GDP eventually?
Just Days Before the Market Began Its Worst Decline In Market History We Called For A Severe Market Crash Due To Fund Liquidation Including AAPL Selling Off from Over $140 to the $90 Level
September 15, 2008
Equity Market Being Used As Source Of Funds By Financial Institutions...
The stock market is being used as a source of funds right now which is not good....the largest players in the equity market have major major capital issues right now....AIG needs $80 Billion just to survive, that is a HUGE number (Goldmans entire market cap is $53B...they basically need a Goldman and a half) and they are just one major player....sure, institutions and market participants across the financial spectrum have used the equity market as a source of funds for a long time but never have the largest institutions in the financial ecosystem been under this much pressure to raise capital...and never have they experienced the need to raise capital for the ultimate sake of survival...that need to raise capital to meet margin calls in order to survive was usually (for the most part) limited to us the small guy...the market could easily weather that kind of selling pressure as long as the big guys were in there buying our stock on the cheap as we forcibly liquidated our holdings...now the shoe's on the other foot with large institutions joining us aggressively on the ask, which puts us in uncharted waters....liquidation of this magnitude leads to extremely rapid declines in asset prices especially those assets widely held by many large institutions....this rapid deterioration in stock prices ultimately leads to the point where stocks are no longer viewed as representing ownership in fundamentally sound companies but rather as a mere source of funds...a way to raise cash....you sell stock you get cash, thats what institutions need cash.....this is when panic begins to set in, it gets scary and stock markets crash, its when people become fearful of owning stocks as an asset class because of rapidly declining asset prices. after todays action you can tell real fear is developing in the market and people are really JUST starting to get a bit nervous about owning stocks....you're starting to see stocks that were worth $60-70/share go to zero....and these arent just any stocks, they were the biggest balls in the market....people are starting to think about what they own and what its really worth if panic sets in....i mean is it that far fetched to see AAPL selling in the 90s....the big boys could sell that stock off another 40 points down to $100 and funds would still be getting out with a profit...thats how you have to think right now....think about how much fund ownership your stocks have and know that those funds are having major problems and need cash.
In May of 2008 We Recommended An Aggressive Short On The DOW at 12,500 Along with Lehman Brothers (LEH)...Over The Course Of The Next 6 Weeks The DOW Would Crater 1500 Points On Bank Solvency Concerns And Eventually Lose 6000 Points By March Of 2009 As Lehman Brother Filed For Bankruptcy
May 29, 2008
Price Action In Financials Signals Trouble Looming On The Horizon...While most have been mesmerized by the price action in commodities, emerging markets and energy related plays over the past several weeks, it appears the financials have been making a rather stealthy yet alarming move to the downside. Looking at the 6 month chart of the XLF we notice that somehow we've managed to make our way back toward the lows set in March, and it appears that Lehman (LEH) has been looking ominously weaker than any other financial. Notably, David Einhorn of Greenlight Capital has been publicly parading the analysis behind his Lehman short position saying they are extremely undercapitalized and have essentially hidden $6.5 billion of CDOs on their balance sheet. Furthermore, credit default swaps on Lehman debt have begun rising dramatically over the past several weeks, going from 130 last month to just under 250 now. Merril debt has also spiked to 196. Taking into account these observations, a put position on the XLF as well as LEH seems like a good bet as something is definitely brewing within the financials yet again. If another round of credit woes surface the Fed may need to remain sidelined a bit longer than expected or we may actually begin to hear expectations of further rate cuts which would add further fuel to
the commodity move. Would remain long Oil and Natural Gas, short XLF and LEH, short USD/EUR, and short the DIA here.
In Early 2008 We Began Sounding The Alarm Over The Strange Weakness In Bank Shares Predicting A Major US Bank Was In Trouble
March 13, 2008
Big US Bank In Trouble...While we as traders will always be on the outside of this Wall Street banking crisis, we can nevertheless extract enormous amounts of information simply by observing trading patterns. It is just as highly skilled poker players extract all the information they need simply by reading how their opponents bet and react to bets. Notice today that the market supposedly rallied on an S&P report that we were nearing an end to large write-downs, yet the XLF still closed red. If the worst was really behind us we would have surely seen the large banks rally hard off the depressed levels they currently trade at. Even Tuesday's Fed-induced rally failed to move the large banks in any significant manner. Something indeed appears very fishy in the financials...
In Early 2008, Just Days Before Oil Began Its Epic Momentum Run To $147, We Called For A Significant Short Squeeze In Crude Which Would Finally Send It Well Past $100/Barrel
February 10, 2008
Oil Looks Set To Squeeze Past $100...
I've been watching oil intently now for the past couple months, waiting for the price of the black gold to break down and validate theories of a severe recession. Yet through builds in crude supplies, a meltdown in global markets, bears pounding the table on a US recession, and declines in GDP growth forecasts for China, crude has held up extremely well bouncing off the $86 level multiple times. At this point we have to believe that there are an enormous amount of frustrated shorts trapped in oil. I mean they've thrown everything but the kitchen sink at the commodity, and it refuses to break down technically. So what happens next? Well a short squeeze. Sidelined longs like myself have waited for signals of strength to get long the commodity and play the much more valid thesis of rising inflation. Gold has been on a tear on the heels of this thesis alone (busting through $900 and setting up for a test of $1000), and there's no reason why oil shouldn't join the party now after flexing its technical muscles. All the signs of rising inflation are firmly in place with the US dollar continuing to weaken, the yield curve continuing to steepen, and the Fed signaling that inflation fighting has taken a clear back seat to stimulating a lethargic economy. Couple a backdrop of rising inflation, strong technicals, and a hefty short position, with a dose of rising geopolitical tension in Nigeria and Venezuela and it appears we are setting up for a solid squeeze here. Watch for slight resistance at the $96 and $100 levels...but once $100 falls, watch for the squeeze to pick up in intensity sending oil to $107-110 quick.