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Ladies and Gents:
Posted below are year-to-date numbers for numerous markets and a few stocks. Some of the biggest surprises;
1. After this year’s huge moves SPX finished unchanged. You all know my thought process with regard to volatility. They say all the volatility is found at the highs and lows of moves. 2011 has been extremely volatile. It has been an almost three-year move higher. Hmmmmmmm!!!!!!!!!
2. With Copper down 22.7%, but stocks unchanged to higher, I feel the indices have some serious catching up to the downside.
3. With tech giants like IBM (+25.3%), Apple (+25.5%) and Google (+8.7%) up big in 2011, why did NDX only gain 2.7%? If these three take a turn for the worse in 2012, it could get ugly. Never lose sight of the fact, Steve Jobs WAS Apple. Steve Jobs IS dead. End of bloody story.
4. Gold ONLY finished $145 higher and Silver finished $3 lower. It sure felt like the precious metals had a much better year than that.
5. With the 10-yr and 30-yr trading at historically low levels, you would think the housing market and the stock market would be flying. Again hmmmmmm!!!!!!!!
6. While Corn was up 25 cents, Wheat lost $1.40 and Soybeans lost $2. Considering the Soybeans are $12 a bushel, they are still trading 2.5 times above historical prices. This is a good sign for farmers…not a good sign for consumers. Squeeze me…squeeze me.
7. Wal-Mart up 10% this year tells me the consumer is looking for bargains. McDonalds up 31% tells me it is cheaper to feed a family of four at McDonalds than it is to buy food at the grocery store. The combination of them both tells me Mr. Blue Collar is getting squeezed. The poor are getting poorer. When man gets hungry he will do whatever he can to feed himself and his family. Buy guns and ammo.
8. Goldman Sachs is down 46%. Could you imagine where GS would be trading if they didn’t get the wink? Time for big layoffs on Wall Street next year. Karma!!!
9. CME down 25%. Things would be different if the place was still run by the members. And guaranteed; the members made their money because they understood risk. The members would have never allowed one player…MF Global to take them down. CME stock is my featured sale in 2012. Get your $70 bids in.
10. My Sicilian grandmother arrived in the USA around 1920. She raised four kids through the depression. Until her death in 1985 she reiterated to me over and over again. Anthony…sava da money…sava da money…sava da money. They say when elder’s talk we should take the cotton out of our ears…put it in our mouth…shut-up and listen. I have been thinking about my grandmother a lot since 2008. She did not have a college education. She spoke broken English. But she survived the depression. Sava da money…sava da money…sava da money. Old and wise. There are not a lot of Baby Boomers out there with savings. Again hmmmmmm!!!!!!!!!
This may have been a low volume rally in the treasuries, but the sell-off from the previous week was also on low volume. I am back in the camp that being, “The treasuries refuse to come off” camp. I want to be long…end of bloody story.
As anticipated, volumes decreased significantly in the 10’s and the Eurodollars. It did not surprise me to see an uptick in open interest. If we get a breakout higher this week, I anticipate more increases in open interest. If this is the case, it could be another good year for treasuries. I still have my sights on a 10-yr cash rate of 0.75%. Don’t fade me now. I’ve been red hot for too long.
I was right to think the Santa Claus Rally came early. This week on Wall Street was a non-event. Considering the sort of moves we saw this year, the year-to-date figures were also a non-event. Historically, December is a good month for the DJX. The DJX finished 172 points higher. Ahhhhh…but NDX is waving a warning flag. I love when NDX leads. NDX finished 17.37 points lower in December. This is not a good sign going into 2012.
You all know me and the treasuries…how I like to key on them. I got to thinking about the significant rally we saw this week and even wrote on Thursday night that I felt the treasuries were waving a warning flag. This is what I wrote.
If it wasn’t the last day of the year, I would be putting out a TLP “Gut Trade.” A TLP “Gut Trade” is defined as; when a market does not do what you think it should, you close your eyes and fade that thought process. With Wall Street basically unchanged this week, the treasuries are well bid with the bonds ahead over 2 ½ full points. The treasuries are telling me something stinks. 9 times out of 10 that stench comes from world bourses. It is my job to have a view…I am bearish Wall Street and bullish the treasuries
Okay TLP. So you nailed the last day of the trading year. You’re our hero. You are only as good as your next trade. So what is it?
Jeez…rough crowd!!! Patience boys and girls…there is definitely a method to my madness. If you look at the two-week statistics below, you will see I am not as mad as one would think. With the numbers on paper in black and white I can visually see/interpret what my gut was telling me at the end of the week.
Over a two-week period the indices were ahead 3% to 4%. Nice move right? If the stock / treasury correlation holds true to form, the treasuries should have fallen hard. The 10-yr lost one tick and the bonds lost a ½-point. The warning flag was waving on Thursday night. The warning flag is still waving this Saturday morning. Something still stinks. The treasuries refuse to come off for a reason. I think Wall Street will see things hits the fan right out of the box on Tuesday morning.
One day at a time…one trade at a time. This is too easy. I want to be long the treasuries and short the indices. If what I wrote above will not convince you, then read my chart explanations below. As you all know, the only index related position I have on is being long QID. QID is the NASDAQ Ultrashort ETF. I was patient all week and bought QID at the end of trade on Thursday. I am small onside and I am running this trade. Do you think I can stay long until October? No…me neither but what a nice idea. I will be happy to run it until the end of January.
MORE BEARISH FOOD FOR THOUGHT…the way stocks eroded all day on Friday and then got hit in the final 10 minutes of trade tells me one thing. The boys were long looking for Santa to have some end of year “window dressing” packed in his sleigh. SOLD SOLD SOLD
I also feel the bears have been sitting patiently waiting for the beginning of the year monies to artificially push stocks higher on Tuesday so they can sell into it. With unemployment at 9% if there are any monies to be invested in stocks, there won’t be as much as usual. If the indices open lower on Tuesday, the bears may have to chase it lower. Or wait for a February bounce to sell into.
The bond market is telling me something stinks. I think 2012 starts bad and ends worse.
Posted below is the data for next week. All times are Central Time.
01/03 9:00 AM ISM Manufacturing Index
1:00 PM FOMC Minutes
01/04 AUTO SALES
6:00 AM MBA Mortgage Applications
6:45 AM ISCS-Goldman Store Sales
9:00 AM Factory Orders
01/05 CHAIN STORE SALES
6:30 AM Challenger Job Cut Report
7:15 AM ADP Employment Report
7:30 AM Initial Claims
9:00 AM ISM Service Index
9:30 AM Nat Gas Report
10:00 AM Crude Inventories
Treasury Refinancing Announcement
01/06 7:30 AM Non-Farm Payrolls
I am going to mix it up this weekend and feature the Crude Oil chart as sort of a tutorial to my Trading System. In 2003-2004, open outcry faded quickly. The funds dominated pushing markets around in such a manner, the little man was constantly getting stopped out. My Trading System was designed in 2005 and tweaked once in 2008. When traded properly, it is a 24-48 hour system. I must warn you…if you want to play the stop is big.
What I know about my Trading System…the January to Easter period is when it is at its best. I have seen my system give us 10, 12 sometimes 15 winners in a row. Last year the period from December to Easter (late April) produced something like 55 out of 62 winners. That is one of the reasons I had such a big year in 2011. I made a lot of money early and spent the remainder of the year KEEPING IT.
1. Crude Oil Daily Chart…one look at the chart, you can see the previous seven sell signals produced six winners. We took little heat on any of the winners. I am short Crude over the weekend (a very small amount) and will look to add on during the Globex session. I will not sell this market in the hole.
2. YMH Daily Chart…enough is enough. The Breakaway Gap before Christmas made us some good money. Now the market is stalling. The spring is tightening. Friday’s weak close tells me there will be little buying interest on the first day of the New Year.
3. ESH Daily Chart…this 1260.00-1270.00 level has been good resistance for a couple of months. Nothing has changed. The market is stalling again up here. My bearish eyes return to the gap below at 1171.25-1182.50. Let’s go have some bearish fun next week.
4. NQH Daily Chart…this market is a no-brainer. You all know I love when the NQH leads. This market continues to lag behind the rest. The lack of bullish enthusiasm here is bearish confirmation for me. My bearish sights return to the gap below at 2182.5-2204.25.
5. SPX Weekly Chart…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 1315.00 and walk away. For those who fancy a long-term trade, the neckline this time comes in at 1277.00.
6. ZNH Daily Chart…one week ago I wrote these same six words. What a difference four days make. This market refuses to sit down. We now have momentum built up to the upside. Two consecutive closes above 13112 will have me looking at the old highs at 13130 and overhead resistance at 13226. I feel we are in for a big move higher early next week.
7. ZBH Daily Chart…last weekend I wrote my New Year’s wish was to get long anywhere from a 137 to 139 handle. My call for lower levels was wrong, but my call to be long over the weekend has not changed. The only problem is a difference of about 5 handles. No worries. The bonds refuse to sit down. The notes are telling me something stinks. I want to be long.
8. 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 five 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.
9. 10-Yr Monthly Cash Chart…for the past 17 years the trend has been lower highs and lower lows. From January 2008 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?
10. 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%.
11. 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.
12. 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.
13. Japanese Yen Monthly Chart…we received another sell signal in October, which gave us a total of four sell signals in the past 12 months. I know my Trading System. We are building a long-term top up here. I want to be short again, but don’t sell it in the hole. Look to sell this rally. 13120 is the 79% retracement level and a good place to initiate another short position. A close below 12710 on a monthly basis and I will be adding on to or initiating a short position.
14. Gold Monthly Chart…the Gold market lost $40 this week to finish at $1566.80. 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. If the market breaks further look for initial support at $1525.00. There is a buy it with both hands kind of support level at $1130.00. You never know. I like the $1130.00 level a lot more than I like the $1525.00 level. There are a lot of people talking about $1,400.00. Well I am happy for them. Let them buy it at $1,400 and sell it to use at $1,100.00. We have not tested the bottom support line since 2008. We will test it again.
And this is from a client who has been in the industry for 30 years. He is still learning. I am still learning. We never stop learning how to make money and KEEP IT. I said it before and will say it again. Trading is just as much a mental game as it is physical game. Stimulus since 2009 has made trading difficult, but it is not the markets which are the problem. When it comes to making money and KEEPING IT, we are the problem. The problem is that 5-inch gap between our ears. When we lose money we have no one to blame but ourselves…especially when we break the rules.
I have not executed a single trade this week ... had I been involved I would have given back some profits. And believe me it's been extremely hard to not have something on as I sit here on the trading floor all day. I can't tell you how many times I loaded my order ticket but did not hit send. The daily volume is anemic; it really is a crap shoot this time of year. After all is said and done I didn't make a whole lot of money this year ... thanks to a lack of discipline and a constant need to have a position during the first 6-7 months of the year. But what I've learned and applied in the last QTR is invaluable. I couldn't have done it without your help. Many thanks for what you've done for me in 2011. Best wishes in 2012.
Lastly…since I think it is going to get ugly in 2012 let’s start out the New Year properly. Never ever underestimate the power of the bear. The bear can undo years of hard work in a matter of months. The bear can undo months of hard work in a matter of weeks. The bear can undo weeks of hard work in a matter of days.
FOOD FOR BEARISH THOUGHT…did you notice the 2nd sentence states; the bear can undo years of hard work in a matter of months. March 2012 will be three years since the lows were put in. Could the mighty bear take back three years of hard work in three months?
And while I am at it, here is how the term bearish came about. The bear in real life slowly lifts himself on his hind legs. Get the bear angry, with his paws extended high the bear pounces furiously down on his victim. Do you think the mighty Wall Street bear is angry yet? Again…hmmmmmm!!!!!!!!!!
Cheers - TLP
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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.