Blog

TLP Brings the Heat!

Site Administrator | January 9, 2012

Responsive image

We have posted this week's commentary from TradingPub Contributor, Tony LaPorta. To join Tony for an in depth market session at the TradingPub, please click the following link:  Register Here. We hope you enjoy this week’s commentary from Tony which is posted below:

01-09-12

Ladies and Gents:

I revisited the mental side of trading so many times this week it is hard to count. My addiction to trading kept on saying, pull the trigger…pull the trigger…pull the trigger. My love of money kept on saying, after an incredible 2011…keeping it is the game…keeping it is the game…keeping it is the bloody game. There was no reason to come back in the first week of the New Year and shoot from the hip. The market will open the same time every day. 80% of traders I know are not in the game anymore. It is vital we remain in the game, because having a boss sucks.

December Non-Farm Payrolls data came in at +200,000. Private sector jobs came in at +212,000. November Payrolls were revised lower to +100,000 from +120,000. October Payrolls were revised higher to +112,000 from +100,000. Payroll revisions for October and November were -8,000. Private sector jobs in November were revised lower to +120,000 versus +140,000. The Unemployment Rate fell to 8.5% from a revised 8.7% in November. Average Hourly Earnings came in at +0.2% versus -0.1% in October. The Average Work Week rose to 34.4 hours per week versus 34.3 in November.

The old saying goes; you are only as good as your last trade. After getting the markets wrong right out of the box on Tuesday, I nailed it on Friday. Buy the rumor / sell the news if you are trading indices or vice versa in the treasuries was spot-on. It took me awhile to figure out what the markets already knew (where there is money there is corruption…duh)…that we were in store for a good Payrolls number. My market call was good. My levels were better. From the YMH gap above to the ZNH support line below. We nailed it.

Considering I lost my way a bit this week, the financial loss was minimal. What I was impressed with was the mental side of TLP’s trading. I struggled with my market calls, but didn’t lose a lot of money. My positions were small and the losses smaller. I waited patiently all week for a market set-up. I do believe I got what I was looking for on Friday. As you all know via my email updates. I put on my first serious position of the year after Payrolls. I am long ZNH. If the notes close a handful of ticks higher on Monday, I am even on the year with 51 weeks of trading ahead of me. Let’s play.

I wrote this next bit on Friday afternoon. And then with too many drinks in himself a reader called me very late on Friday night. Being sober for 8 years, I do enjoy talking to inebriated friends slurring their words. They remind me I am only one drink away from feeling really bad on Saturday morning. Anyhow, my friend called me to discuss his gut feel. That gut feel being; good data means Obama for four more years. Read on.

I wrote this many times in the past. On January 3, 2008 Hillary Clinton was the favorite to win the Iowa Democratic Caucus. Clinton took 3rd. Obama smoked her and the field on his way to win the Presidential Election in November 2008. On January 3, 2008 the DJIA finished at 13,055. On November 5, 2008 the Dow finished at 9,139. By March 2009 the closing low was 6,547. The markets knew in advance.

The point of my story…as long as Obama can appear on TV and pat himself on the back for creating jobs, the better chance he has of winning the Presidential Election in November. If Obama retains the presidency, the market will fall again…usually 6-9 months in advance. Let this be a wakeup call to the Republicans. Obama will beat Mitt Romney.

And let this be a wakeup call to you. The Republicans know it. The only way the Republicans get back into the White House is one more year of economic pain. They will do everything in their power to derail the process. It will be another year of political uncertainty. World bourses do not like uncertainty.

Posted below are the Non-Farm Payrolls since January 2008. The numbers are getting bigger. That is a good thing. What is not so good? History is repeating itself. Four years ago the talk on CNBC was…the market is different this time. When America sneezes, the rest of the world will not catch a cold. I said it was a load then and I was correct.

This time around CNBC is beating on the same drum. When Europe sneezes the rest of the world will not catch a cold. May I reiterate? That thought process is still a load. The world it too interconnected to think otherwise. It hasn’t even gotten ugly yet.

December.……….+200,000

November 2011…+100,000

October 2011..…..+112,000

September 2011…+210,000

August 2011……..+122,000

July 2011.…………+85,000

June 2011.………...+20,000

May 2011.…………+72,000

April 2011.……….+217,000

March 2011.……..+194,000

February 2011…..+233,000

January 2011.…….+68,000

December 2010….+152,000

November 2010..…+93,000

October 2010……+210,000

September 2010…...-24,000

August 2010..……….-1,000

July 2010..…………-63,000

June 2010….……..-175,000

May 2010...………+432,000

April 2010.……….+252,000

March 2010...…….+208000

February 2010……+44,000

January 2010……..+14,000

December 2009......-109,000

November 2009.......+64,000

October 2009……..-224,000

September 2009.....-139,000

August 2009……...-154,000

July 2009…………-304,000

June 2009.………..-463,000

May 2009………...-303,000

April 2009……..…-519,000

March 2009……....-652,000

February 2009…...-681,000

January 2009….....-741,000

December 2008..…-524,000

November 2008…..-584,000

October 2008… ….-423,000

September 2008….-284,000

August 2008....…. .-127,000

July 2008…………..-67,000

June 2008………...-100,000

May 2008……… …-62,000

April 2008…….…...-67,000

March 2008...……..-87,000

February 2008…….-83,000

January 2008...……-75,000

I waited patiently all week until Friday. When ZNH traded back above 13021, I decided to put on my first position of the year. I bought ZNH at 13021, 13023 and 13026.5. I have ¾ of my desired position on with a buy stop for the last ¼ at 13101.5. I really like this trade. I put it out on Twitter on Friday morning. This is the TLP “Trade of the Year.” Buy ZNH and take a 10-month holiday. If anyone would like to follow me on Twitter my username is @powerpoints_net.

FOOD FOR THOUGHT…on T-W-Th we have 3-yr, 10-yr and 30-yr auctions. If this sector firms up on Monday, you know the auctions will be well received.

Let these numbers below be a warning flag to the treasury shorts. On Tuesday and Wednesday, the market came off on light volume. Open interest was unchanged. Thursday and Friday’s Reversal Days were on good volume and open interest increase significantly. I was always taught; volume equals validity. This is a good sign for the treasury bulls.

As we all know, last year saw DJX lead stocks higher gaining 5.5%. NDX finished 2.7% higher and SPX was unchanged. I started to notice this week. DJX is all of a sudden not the leader to the upside anymore. Actually it is the laggard versus SPX and NQX. Forever and I mean for bloody ever, I have always been in the “I love when NQH leads” camp.

They changed the rules on us last year…surprise/surprise. They have been changing the rules since the summer of 2009. Anyhow, December saw the DJX and SPX finish higher while the NDX ended lower. In this manipulated piece of crap market, is it now time for the DJX to lead? It led last year. If this is the case, the DJX is telling me to be short. We will see how it plays out.

INDEX MARKETS

One day at a time…one trade at a time. ZNH is telling me major support held. When this occurs we should see a significant bounce. Volume and Open Interest indicators are confirming my bullish outlook. There are note and bond auctions this week. The last round of 3’s, 10’s and 30’s saw huge demand. It is the beginning of a New Year with monies which need to be invested. May I reiterate? Where are you going to put your money? Europe? Jon Corzine tried that and you saw what happened.

If I like the treasuries then I refuse to sing a bullish indices song. I think the things hit the fan right out of the box on Monday. It is my job to have a view. 33 years later I am still in the game. I think I got it right a bit more than I got it wrong. Stick around. The year is early.

Posted below is the data for next week. All times are Central Time.

01/09 2:00 PM Consumer Credit

01/10 6:30 AM NFIB Small Business Optimism Index

6:45 AM ICSC-Goldman Same Store Sales

9:00 AM Wholesale Trade

12:00 PM 3-Yr Note Auction

01/11 6:00 AM MBA Purchase Applications

9:30 AM Crude Inventories

12:00 PM 10-Yr Note Auction

1:00 PM Beige Book

01/12 7:30 AM Initial Claims

Retail Sales

8:45 AM Bloomberg Consumer Confidence Index

9:00 AM Business Inventories

9:30 AM Nat Gas Report

10:00 AM 10-Yr TIPS Announcement

12:00 PM 30-Yr Bond Auction

1:00 PM Treasury Budget

01/13 7:30 AM Import/Export Prices

Trade Balance

8:55 AM Michigan Sentiment

Posted below is the pit versus computer Unemployment figures since 2003. I still find it amazing how quickly the computer took over all the business.

No doubt about it. The chart of the week has to be any of my 10-yr note charts. All week I wrote about the support line which dated back to April 2011. Support came in on Friday at 13005. We also had a couple of Fibonacci support levels at 13001 and 13003. I wrote on Thursday night…this is major support. After the data, ZNH traded down to 13003.

Posted below is a ZNH Daily Chart emphasizing the support line. One look at the chart will show you why I was so keen all week on this level. The chart I am really keen on is the ZNH Daily Chart with the Ascending Right Triangle. Check it out and the explanation. Now I have a bullish technical reason to go along with my gut feeling. Also the ZNH Monthly Chart and the 10-Yr Monthly Cash Chart. All of these charts are telling me the 10-yr notes are going higher…a lot bloody higher.

Lastly…historically speaking interest rates fall in Presidential Election years. I mean it is kind of hard to get the Fed Funds rate any lower, but the Fed can surely massage long-term rates even lower via QE3. Technical analysis says 10-yr rates go to 0.75%. I am a technician. The formation is a classic.

1. ZNH Daily Chart Emphasizing the Support Line…with the chart expanded, you will see why I have emphasized all week the significance of this support line. I think it’s time for a breakout higher. The spring is tightening.

 

2. ZNH Daily Chart…this chart is a must look. After expanding it I noticed an Ascending Right Triangle. So I readjusted a few support and resistance lines and there it is. The breakout level is at 13109. What I know about this type of formation…the breakout through resistance at 13109 should be significant. Then we should look for some sort of return to the breakout area. If the move is for real, the return should fall short, but a noticeable return it should be. Friday was also a Reversal Day. The objective is a trade above Friday’s high at 13028.5.

 

3. ZBH Daily Chart…Friday was a Reversal Day. The objective is a trade above Friday’s high of 14308. This market broke support but settled back above it again. I am looking for a snap-back rally early in the week. The Pattern Gap above still looms. Filling that gap at 14331-14406 is my target. Maybe we fill it on Monday.

 

4. ZNH Monthly Chart… this chart shows a nice 12-year bullish channel with resistance coming in at 13226. This market traded as high as 13130 in September. If we get to 13226, this is where I want to take profits and re-evaluate. If you look at the previous two highs in 2003 and 2008, the market pulled back quickly. This time around the market has traded sideways just below resistance for now six months. The longer we sit up here the more powerful the move through the resistance line. The first time up to 13226 is a sale. After that you are on your own. I think we are going a lot higher. The gambling man is long and he’s running them. Hmmmm…I bought a few on Friday actually.

 

5. 10-Yr Monthly Cash Chart…for the past 17 years the trend has been lower highs and lower lows. From January 2009 to July 2011, this market traded sideways and formed a Symmetrical Triangle. The bottom support was broken in August with rates following thru significantly lower and continuing lower in September. It appears the return to the breakout area at 2.53% fell short. The Symmetrical Triangle objective is 0.75%. DOES JAPAN RING A BELL?

 

6. 30-Yr Monthly Cash Chart…this chart is worth a look. The resistance line dates back to 1994. Rates have eased significantly this year. Any retest of the 3.462% level is a selling opportunity. October’s high in rates was 3.452%. This is serious resistance up here. Eventually I am looking for a retest and break of the lows of the move at 2.519%. In a year’s time I think we will see 30-yr rates below 2%.

 

7. YMH and ESH Daily Charts…Tuesday’s gap open higher was in my mind an Exhaustion Gap. YMH filled the gap below on Thursday. ESH came close but fell a ½-handle short of filling its Exhaustion Gap. A tiny gap remains at 1259.25-1259.75. I think it is time to go fill that gap this week…most likely on Monday. The beginning of the year monies are invested. It is time to go remind these fund managers about pain. I want to be short. A close below YMH @ 12200 and ESH @ 1257.00 will be painful confirmation for the longs.

 

8. NQH Daily Chart…they never make the game easy and this chart has me gasping. The best I can give you is this. This market cannot continue higher on its own. The 79% level at 2352-2353 should prove good resistance. I remain bearish. A close below 2286 will have me real bearish.

 

9. SPX Weekly Chart…almost three months ago the technicians sold the return to the neckline at 1271.00. This is a long-term trade. It is time to sit short with your stop in above the resistance line at 1313.00 and walk away. For those who fancy a long-term trade, the neckline this time comes in at 1277.00. This is a good place to put on a short position.

 

 

10. British Pound Monthly Chart…this chart is a must look. There is a Symmetrical Triangle on this chart. Symmetrical Triangles are Continuation Patterns. 75% of the time the market will break out lower. I don’t think it is time to break out yet, but maybe in another couple of months. When it breaks out the objective is 3200 points. And remember; if it goes higher…i.e…against the odds, it will go quick. The chart is self-explanatory.

 

11. Swiss Franc Monthly…the Spiked Top / Key Reversal Month is still telling me to look for more downside to come. With so much in Europe that could go wrong, if it does go wrong the Swiss along with the Euro could take a serious hit. Any kind of move lower to the 10076-10090 level is a place to look for good support. The 50-month moving average comes in at 9900.

 

12. Japanese Yen Monthly Chart…we are getting a sell signal this month. If this market rallies from here the signal will go away. Let it be noted; this sell signal is on a monthly chart. There is plenty of time for this market to rally. One thing for sure, if the Yen breaks from here the signal will keep. If the signal keeps this will be out 5th sell signal in the past 15 months. I know my Trading System. This market has rallied straight up since June 2007. We are building a long-term top up here. I want to start initiating a very small short position. Keep it small enough that you can afford to sell more at the 79% retracement level at 13120. This is a long-term trade. A close below 12710 on a monthly basis and I will be selling more.

 

13. Gold Monthly Chart…the Gold market gained $50 this week to finish at $1616.80. I have been talking about volatility. How volatility is always found at the highs and lows of the move. We saw extreme volatility in August and September. We received a sell signal in September. This market came off big time in December. All the players want to buy a break. I want to sell this bounce. If the market breaks $1525.00, this will bring in the 38.2% level at $1285.00. It will also scare out most of the longs who bought it above $1,700.00. It is at this $1285.00 level I think we will find good support. Before all is said and done, I do not want to buy it with both hands until the trend line at $1130.00 is tested again. We have not tested the bottom support line since 2008. We will test it again someday. May I reiterate? I got bullish at $309. The rest of them with the exception of Richard Russell of course got bullish above $1,500. Go on you schmucks…get long up here.

 

Cheers - TLP

Be sure to join us for our next event where we will be joined by Tony LaPorta as we “Learn from a 30 Year Veteran”.   Click here to:  Learn From a 30 Year Veteran

Cheers,

The TradingPub
“Trade, Talk, Learn – Cheers to Success”
Follow us on twitter

Risk Disclaimer: Past performance is not indicative of future results. Futures trading involves substantial financial risk. Views of guest commentators do not represent those of TradingPub.com.  Article intended for educational purposes only and not meant in anyway as a solicitation to buy or sell certain securities.  Please consult your personal financial advisor before using this information for your own trading purposes.