Don’t Get Caught Up in the News

Wed Jun 6, 2012 12:04am

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Below is a picture of the weekly and daily charts of the same instrument. Do these look like a good buy or sell at current levels? They are not the VIX or any double, triple, or inverse ETF.

After the market there was a news brought to my attention from @ibc_fn that brings some hope to the bulls. One of the most dovish Fed officials called for more aggressive policy easing. A recent post form @chessNwine titled “The Attack of the Short-Killer Hot Tips” also mentioned this but also gives information to keep in mind.

For me this is all a reminder to keep your time frame in mind. I personally have been daytrading positions in this recent market as the volatility is perfect. But with the daytrading, it is a reminder for me to stay out of swing positions as the day-to-day volatility would more than likely whip me around and the news is too much right now. Any amount of good news could cause a violent reaction to the upside or we get the continued selling looking for the forced liquidation of funds.

The above charts are inverse charts of the SPX. I state the reasons why I like the charts here. With many traders being long bias, it is a good way to look at the chart from another perspective with your bullish chart pattern mindset.

Personally I am still looking for things to settle down some and waiting for this news to dissipate. The correlations are getting to be too much between stocks and the news. Also, what always seems as positive news could also lead to more selling after the news as @chessNwine states in his post:

“It does not matter what you or I think of the possibility that more QE will be wildly bullish for the market. All that matters is what the market actually does.”

Charts serve as great reminders to forget the news event but trade the chart and what you are seeing. Who cares WHAT the news was, how did the market react. News and anything else are events and knowing the event and trading the event are two seperate things.

Can China Pull It Off Again and Crush Some Stubborn Shorts?

Wed May 30, 2012 11:55pm

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Friday could be a big day as we get China Manufacturing, US Manufacturing, and US Nonfarm Payrolls. In reading the blogs at iBankCoin, I often see the word “China” written in posts by The Fly. This has caught my attention because I remember the summer of 2010. We saw major selling in May only to be followed by a big range for the rest of the summer.

Then on Sept. 1, 2010 China released their manufacturing data report and the overnight futures market exploded. The chart below shows the selling in May with the big summer range and then the beginning of a huge run starting with China’s manufacturing data.

Here is a news release from news.com.au titled “Highest share market close in three weeks” with some excerpts:

“Mr Kimber said Chinese manufacturing data reduced the possibility of a sharp slowdown in the world’s second largest economy and gave a boost to local resource companies.

The HSBC China Manufacturing PMI, or purchasing managers index, rose to a three-month high of 51.9 last month from 49.4 in July.

“Of course we had the Chinese numbers out today, which confirmed what (BHP chief executive) Marius Kloppers was saying last week,” Mr Kimber said.

“That basically people who were panicking about China slowing down to five or six per cent are wrong.””

Here is another release from MarketWatch titled “US Stocks Surge As Manufacturing Data Trumps Jobs; DJIA Up 220” with some excerpts:

“Asian shares posted gains overnight, buoyed by encouraging manufacturing data from China and better-than-expected growth in Australia, which allayed some near-term worries about the global economy.

In the currency markets, the euro rose 1% to $1.2817. The U.S. Dollar Index, which tracks the performance of the greenback against a basket of six currencies, fell 1.1%. The Bank for International Settlements reported that daily turnover in the world’s foreign-exchange markets has soared to $4 trillion this year.

Commodity prices rallied, with October crude-oil futures gaining 2.5% to nearly $74 a barrel, ahead of official oil inventory numbers. Oil prices tumbled in August amid growth concerns and unusually high inventory levels. Copper futures surged more than 3%.”

Below is a zoomed in view of the day that started a huge run that topped in May 2011 and the European news started to surface.

That following Friday we had the Nonfarm Payrolls and U.S. ISM Manufacturing data release in which the jobs report wasn’t as bad as expected and the ISM came in a little disappointing. Excerpts provided by MarketWatch “Stocks close higher on jobs optimism“:

“The market leaped after nonfarm payrolls data showed jobs slowing at half the rate predicted by economists. The Labor Department said the U.S. lost 54,000 jobs last month, about half of what economists had expected and matching the level of revised losses recorded the previous month.

The unemployment rate, calculated using a separate household survey, edged up to 9.6%, as expected, from 9.5% for the previous two months.

But the economic recovery still looks weak; data released Friday by the Institute for Supply Management showed a slowing expansion in the U.S. nonmanufacturing sector last month.”

Below is a zoomed out view from the day that encompasses both news events to when the market topped in May 2011.

Of course this is all speculative and I’m not calling a huge run. I can see a summer grind like 2010 which then fuels another nice run. I do like the correlation of current sentiment to the way it was during 2010 and those traders that failed to switch their mindset missed out. Also I am not saying that we had the huge run because of China, but it was a news catalyst and event followed by the not-so-bad jobs number that fueled the money into the market.

I also bring this up because commodities and the dollar are in the same state. Copper and Oil were getting sold and were fueled after these events and the Dollar was soaring, only to see it sell off after these events.

Who’s That Man In the Corner

Fri May 18, 2012 1:58pm

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A lot of talk right now of “the IPO” and how the market is reacting but one thing I am not seeing much of is the World Leaders plotting at Camp David via the 38th G8 Summit ; approximately 20 miles from my dwelling. I imagine the leaders from their respective country are talking about how great they raped the markets in the beginning of the year to leave the common folk feeding on scraps right now. But now they realize things are going down hill and the economy never really recovered but it sure did look like it. Yes the market may digest news 6 months ahead of time as the case is often quoted, but who really knows. So now they are thinking of ways on how we can all help each other out and the man in corner of the room in the shadow just taking things in while cigar smoke is billowing out in dollar signs is The Beard.

So what comes out of the G8 Summit, who knows. But things would be setting up nicely if we have some miraculous news or intervention over the weekend news from any of the countries economies that would cause this market to skyrocket on Monday and leave people that are shorting or still short to run for cover. News is definitely dire here and institutions do not seem to be buying but are just waiting for any reason to buy. Technically things really don’t seem too bad in my opinion as we’re coming back to the bottom of the February – July 2011 range. The charts do look appealing for longer term holdings and for some managers to start accumulating. Yes we could see more downside but you can’t be in this game to pick bottoms.

This is all speculation of course but the recent action in Gold and Silver is a supporting factor of maybe some news to come and news over the weekend is always a great throw it in your face to market bears. But with all this we could also get the BOHICA Pattern Trade too and more misery to the bulls.