At least the Complacency Index, as I prefer to call the VIX, nudged down somewhat from what was a 22 month high!
The Gold Volatility Index also moved lower today. It hit its highest level this year but compared to the VIX, still looks rather tame by comparison.
The Dollar, in spite of all the wild swings, violent price action and outright chaos that seemed to mark the currency markets this week essentially ended the week going no where! It remains in a consolidation mode working between 87 on the topside and 85 on the bottom. The market has certainly relieved its overbought status on the technical indicators so this range trade is actually a pretty good thing as far as I am concerned.
I am noting that the grains all moved lower today. There was some chatter making the rounds earlier this week that one of the reasons for the sharp moves higher in the beans and to some extent the wheat and corn, was the result of hedge funds moving money out of stocks and into agricultural commodities. I am not sure I buy that explanation as I see no reason from a macro level for big funds to be committing to the grains especially when the Dollar has been firm.
There was the usual chatter about harvest delays, dryness in some key Brazilian growing areas during the current planting season down there, as well as some decent export business but as the FOMC notes revealed this week, a harvest is on the way that is going to tax the ability of the US to move it and store it.
As of now I see nothing that would convince me that a harvest low is in especially with a lot more of this year's crop yet to go under the combines. I am looking for some hedge pressure to begin surfacing next week as the weather across the Midwest looks very conducive to some substantial harvest progress being made.
The tightness in last year's bean carryover has contributed to some strength in the meal as processors scramble for supplies but with some big harvest progress coming our way, that supply tightness that currently exists is not going to last too much longer.
Feeder cattle hit limit down today. Let's see they were LIMIT DOWN on both Tuesday and Wednesday this week - then they hit limit down Thursday morning only to reverse and CLOSE LIMIT UP ( that is an intraday price swing of some $3,000 per single contract). Today they went back down the LIMIT once more. And people wonder why my hair is all turning gray!! like I have said many times, - those gold perma bulls who are always screaming about gold manipulation when it experiences a huge move lower have NEVER TRADED anything else remotely resembling a commodity. Just look at these goofy cattle this week not to mention the hogs, which were obliterated.
I will get some more up later on today on the Commitments of Trader reports and see if there is anything noteworthy in there. Sadly that report is essentially dated by the time we get it since it does not cover Wednesday through Friday of the current week. With a week like the one that we have just witnessed, there is no telling what has happened to the various positions of a huge number of traders out there.
Copper managed to claw its way back over the $3.00 level. There is one helluva battle shaping up near that zone. It dipped down to $2.95 today but some good buying was seen. As the equities began coming back, so did copper.
Silver was not helped by copper's mild strength today as it succumbed to the selling seen in nearby gold. Silver is currently stuck under a resistance level coming in near $17.50.
One last thing - the S&P 500 just barely touched ( depending on which chart one uses ) hitting the 10% CORRECTION LEVEL before bouncing right off of it and moving higher once more. The index ended down only around 13 points on the week after all its wild gyrations. That is a pretty impressive feat the bulls pulled off!
It does however need to climb back ABOVE the 1900 level, which was the support zone that was holding it aloft. If the bulls can manage to close out next week's trading above that level, they will have managed some kind of feat! If they do not, 1800 is going to be tested once more.
Dan da man is the only one around here who dares trade cattle! .. limit up down and all around!!
ReplyDeletesomebody said that US(ZB) the long bond moved $9000 a contract the other day! even with VIX at 20 it's going to be very volatile as moves in stocks and bonds radiate out to the other instruments.
HUI never could regain it's 20-dma MA this week and a HUI kerploooey to end the week... GC large specs piled into the long side on cot(expecting cot commentators to say that's bad for the overbought GC)
The gold-silver ratio has risen to a fresh high. This week’s gain follows last week’s bullish hammer doji. Weekly momentum
indicators are bullish and accelerating.
all right looking forward to sunday pre-open research..
ole-timer thought for the day: —"Markets almost always see retests"
cheers!
Apparently Yellen and Bullard can read stock charts too as their very well timed bullish comments and more QE comments saved the S&P from going into that 10% correction territory.
ReplyDeleteAnd this week was just more proof that the Fed is not Data Dependent at all but rather Market Dependant for ending QE, especially stock market dependent.
If the stock markets don't behave next week look for more Fed talking head QE talk to crawl out of the woodwork.
Perhaps the stock markets now seem to believe QE won't end this month which might just hold them up next week.
Are you capable of writing a Comment - or even a paragraph - without referring to QE in it?
DeleteSure Ophelia, just let me know when the markets care about something other than the Fed's or QE or no QE?
DeleteLet me know when the real economic recovery starts and I will comment on that.
@ Ophelia
DeleteThis trend lives and dies on QE.
I rest my case
DeleteRumpole of the Bailey, QE
Thanks Dan, appreciate it.
ReplyDeleteHave a great weekend.
All I saw this week was Bullard and Yellen jaw boning the market at the dead lows. And Bullard wants even more communications.
ReplyDeleteDan,
do you trust the Fed? I know it is what it is, but does it not make you uneasy?
My two cents.
DeleteI don't trust government involvement in the markets period.
Basic rules and regulations sure. The rest not so much. I do confess to Liberterian leanings.
Loren;
ReplyDeleteI don't like Central Banks in general but recognize that they are a reality in today's markets and that any trading strategy that does not take into account their activity is doomed to fail.
Central bank manipulation in markets.
DeleteThanks Dan for the comments.
ReplyDeleteThe Russell actually sold off after the market opened today and ended the day down. Couldn't get past the 1100 level of resistance - its ~38% fib retracement from the Sept high of 1188 to the low of 1039 this week.
Ivan Pavlov would be proud of the way the Fed's "bell" was able to make the markets salivate this week. After the Bullard comments, seems the markets could be in for a disappointment if the Fed doesn't offer more "bell" in their meeting later this month...
Yup Trinity the stock markets are addicted to QE.
DeleteThe Fed tried to exit QE1 and QE2 and it failed, stock markets tanked down.
The Fed knows they have to make up some excuse to continue QE or the stock markets will fall again.
Just shows the Fed can't print trillions of dollars and then stop and expect the asset bubbles they have created to stay up.
Amazing how clueless the markets are to this still.
Yes it is what it is. Seems the markets are expecting a more "dovish" tone coming from the Fed in the next meeting after comments from Bullard. We'll see what happens.
DeleteYes its ridiculous now as every time the stock markets go down some joker from the Fed comes out and talks about more easy money.
DeleteThe Fed refuses to let the stock markets stand on their own.
Yes lets see if the Bullard comments even last into next week to keep the stock markets up.
How many technicians were pounding the table to sell oil before the selloff ? I am not being a jackass, I am just seriously wondering if there was any. Because I'll defer to whoever did for a bottom in gold. Or maybe gold is going to zero. If its been through this much of a bear market , it must not be worth anything at all.
ReplyDeleteThe markets worship the Fed and have a cult like belief in what they are doing.
DeleteThe markets seem to not care how much money the Fed prints as long as it makes the stock markets go up. They remain clueless as ever.
Trader Dan, while not a table pounder, certainly warned...
DeleteM:
ReplyDeleteits worth $1239/oz today...
yup
DeleteAnd US debt has gone up for 33 years in a row and just made all time highs. Lets all pile in and get rich.
Of course, I disagree with M on a technical point of view, as T.A works very well indeed, even if one must also take into account fundamentals on the long term. But we are not talking about long term here, but a few weeks max, to see how gold behaves.
DeleteGold is hitting against 1242 and if it can't close above it, it will be a re-test of 1180 and probable crash soon.
As long as we don't go through 1280, gold remains very weak on the middle-term, and inside a very bearish channel.
There is absolutely no hurry to buy gold right now.
On the contrary, you would buy just under a resistance level.
Buying gold 3% of its current price to make sure the bearish channel is broken on the upside is not a big price to pay for so called "long term investors" who dream about 5000 $ an ounce.
And that may be the difference between making money or being doomed by buying at the highs right now and panic + sell if gold reverts and heads back towards 1000.
M is obviously full of scorn for technical analysis and won't take it into account in his decisions.
To me, it is obviously a mistake, coming from ignorance about this very tool and how it should be used properly. It's never too late to start learning.
@ Hubert
DeleteI get what you are saying. I should probably pay some attention to the technicals as i ease into this market.
But didn't gold have a false technical break out earlier in the year ? and a false golden cross ?
Hi M,
DeleteI'm not following golden crosses particularly.
It's like Hindenburg omens, etc... I think it was shown that they are not really relevant i.e the success rate is not quite good. Especially taken a the only single factor of decision, just as any other indicator btw.
You must have the confirmation of a few indicators together, ideally on several time units.
The faster time unit will then give you an additional confirmation that prices are bouncing in the area you expected (divergences on MACD, Sto, Rsi, OBVD, with prices bouncing, etc...).
With all that "safety net" in place, T.A is still only about increasing a bit your odds to be right.
Then what makes the difference is that the areas you choose usually allow you to put a stop loss close to your entry level.
So the point is not to be right all the time.
You will never be.
The point is to lose as little money as possible when the market turns the other direction, whatever your analysis tell you. And to stay in the market when you are right, for example by keeping the last 1/3 or 1/4 of your remaining line even if you reached your target.
But honestly, of course there are probably many wrong signals "sold" to newbies for T.A : we must find fish to make money, mustn't we? Who is losing the money we earn?
Let the fish care about their hindenburg omens and death crosses (which are worth noticing, but not the only parameter to make a decision, and that's why they fail : no understanding of real dynamic TA nor sound money management).
There has been I think 5 Himdenberg Omans in US stocks since late 2010.
Delete@ M--
DeleteRE the false breakouts. The "golden cross" that gold bore us was a pretty superficial indicator at best. Other technical indicators were right no. Here are some others that could have gotten you out of a long / into a short. 1. Gold's declining 200dma (Long term downtrend) 2. Strong bearish reversals at daily level daily 3. MACD crossing under signal line & slow stochastic tanking 4. MACD histogram declining into high (loss of momentum). I moved vertical axis over a day so it would be more visible. By the way, TA works better, for me, with the prevailing trend-fewer false signals, more forgiving. Thus bearish signals good for trading gold / bullish good for trading S&P
http://tinypic.com/m/icmoi8/3
@ M-
DeleteBTW - Looking at the chart above, it appears that gold is ready to collapse. Total lack of strength in HUI/GDX/GDXJ seems to forebode it as well.
I'm sharing a few techniques on this blog which I think have a high rate of success. Each of them is an indicator. When several of them tell me the same thing, it allows me to get in/out of a market. A single indicator is usually not enough to make a decision, but several of them together often gives you a high pair before you bet to see the flop.
ReplyDeleteHere is a chart of SP500.
http://i59.tinypic.com/2ish76d.jpg
Many analysis I see on the web only show prices, and only show support and resistances based on price history. I very rarely see a representation of bollinger bands, a very useful tool (ex : buy WTI at 80.20 $ on the inf bol 100 daily). And I also rarely see a representation of simple MACD and their propagation axis.
Here is the principle : let's zoom out on SP500, take a chart representing 1000 last days. Watch MACD : it's inside a triangle between two lines, green and red. Prices usually bounce when MACD is hitting the axis.
10th of october, MACD broke its green propagation signal. SP was at 1916.
You know what happened since.
Breaking a propagation axis such as those is an interesting signal indicating that the trend may reverse, and volatility increase.
Have a nice weekend,
P.S : on monday/tuesday, if SP makes it through 1900, watch 1917 area. It is the ema15 and also median of a downwards pitchfork on the daily time unit.
DeleteWith such volatility it's better to be behind the screen regularly and monitor prices on the faster time units (4h / 1h) before making the decision of shorting the market. I'd be tempted to short around 1917 but probably won't, as I'll be busy intraday with my other "real" job :)
Well said, HDH. However just matter of taste. I use Keltner channel based on ATR rather than BB on STD. I use stochastic for long term trend and MACD usually confirmed SSD later bit. Volatility Stop by Welles Wilder also good one. Basically I am day trading, so Monday is a sell day according to The Taylor Trading Techinque (TTT). A sell day you not sell short just buy. If you want to short , do it on Tuesday. Monday also a day after Friday breakout so it usually back a bit and testing Friday High. We can short at that High. All depends on the first hour of SP.Day trading purely emotional trading. My main market is forex which tend to going for trend longer. You just pick a currency which strongest and other weakest to make sure you have a strong trend. That the fundamental, then deploy technical for entry.The rest is money management
Delete@Hubert, I'm curious why you use the 9,20,7 MACD series on your chart, rather than, say 12,26,9 on the charts your posted. Thanks, MDL.
DeleteHubert, if you are so confident about the reliability of your trading system, which you refer to as a precision measure, why do you need a 'real job'?
Delete@Hubert-Here you go for a chart of $SPX.
Deletehttp://tinypic.com/m/icmn90/3
Slow stochastic turning up / out of oversold territory (20). It has been a pretty reliable indicator of of uptrends over the past two years (only past year charted) & tends to turn before MACD (which also looks to be turning up toward the signal line)
Who knows if indeed this time is different…Let's see what Ebola news comes out this weekend / what happens to oil early next week. Cycle man Armstrong "sees" $INDU up into early November based on Friday's close (though doesn't seem to be overly confident).
I would use this to buy into some SPX ETFs for a quick trade & perhaps into some "safer" issues like mom
not Freudian "mom" - XOM - autocorrect.
Delete@mdlgto, because I think it anticipates more that way. You get the right signal a bit earlier than with the standard parameter.
Delete@peter, because :
1) I don't want to spend all my life being a day trader. I want to do something else. I like trading, but not all the time and I wouldn't like it if I had to be behind a screen all day long.
2) I trust my system, but I don't necessary trust myself. Playing big to ensure significant amounts of money every month to provide for my family, with permanent risk of losing or doing something wrong, is not for me. I enjoy making some additional money from trading. I would not enjoy depending only on it for a living.
3) it is not "my" system. It's things I've gathered here and there from successful different traders. For now it's working fine, and I'm even impressed by it, because it's still a new "system" to me and because finally my success rate has increased significantly thanks to it. But it can stop tomorrow. One thing I also learned from a trader is that it is a constant search. Some indicators which used to works become ineffective with time. So, no guarantee that someday, I won't be a bad trader again (though I don't consider myself a trader, really, only an interested amateur who trades with small amounts and tries to play a bit watching how the real ones do.)
DeleteHubert, thank you for your answer. Very interesting. I suppose it depends on what your other job is. As I said to you before, I do think t/a is very useful but I lazily follow the work of others. However, i am influenced by other factors, such as fundamentals, and not least the the psychology of the markets, when I think I can gauge it. For example, is the Yellen Put a 'fundamental' or 'psychology'?
DeleteHere is a chart to comment my trade on the WTI (but sure, T.A doesn't work...ever lol).
ReplyDeletehttp://i62.tinypic.com/2ihw9s3.jpg
This is what I'm trying to say about a convergence of indicators pointing at a specific support area.
Daily time unit : the lower black line is the symetrical projection of the previous downwards channel. This is another of my techniques. It is valid for a horizontal range, but also for upwards channels (see SP 500 now, with a new upwards line around 1800), downwards channel (see Silver daily time unit, which hit and bounced exactly on this kind of symetrical projections).
Of course the interest of T.A is that those lines PRECEDE the price action.
You don't want to explain what the market did afterwards.
You want to follow lines to help you anticipate where/when something might happen and monitor prices if they reach those kind of areas.
So, as we had a potential target for a bounce on the daily time unit, what does the weekly time unit say?
Jackpot : it says the bol inf 100 period is forming a range, with high likelihood of supporting prices. In addition, there is a nice pitchfork whose median is also going to help support the 80-81 area.
On the same weekly time unit, prices bounced twice on the 80 $ level and are already also forming a horizontal support with prices at this level.
Conclusion : many things seem to show that 80 $ area is going to act as a support area, in a short-term oversold market. So on the faster time unit, being a contrarian becomes possible, because a stop loss can be put around 79 $ if we decide to get inside the market. Of course, taking profits quickly is mandatory because this is a contrarian trade upwards in a longer term trend downwards. (need to understand time units to trade).
So I quickly took 2/3 of the profits at 83.60.
My last 1/3 is at 86 and my stop loss is already raised above my initial entry level.
The trend is your friend...yes and no. Understand the trend is essential. Understand there are several trends depending upon the time unit you are watching is even more critical. Understand this and you can start trying to trade as a contrarian on potential reversal areas, no matter what the trend is on the slower time units.
There are many ways to trade, but that's the way I do it most of the time.
You can start practicing T.A on free tools like prorealtime.
So let's start sharing charts here :)
I like to follow trend now even my main strategy is based on day trading. I find it hard to pursuit swing trading which fighting against the move and easily to be ran over by bots
Delete77; To say something like the long bond traded a 9k range last Wednesday according to some unidentified source was once again very unprofessional and wrong on your part. This is a very clean and sophisticated site and the last thing we need is bad information. I have corrected you in the past and you have not acknowledged your mistakes and I do not expect you will this time either.
ReplyDeleteFor the rest of the readers here, the Dec 30 Year had a range of $5500 that day.
This blatant attempt by the Fed to manipulate the markets with comments by Yellen and Bullard is a very sad indictment of modern so-called Capitalism. It makes a complete mockery of belief that the markets are free, but worse, it has certain harmful side effects, as well as revealing the real state of mind of the Fed itself, giving us insights that they do not intend us to have:
ReplyDeleteIt tells us that the Fed is far more worried about the economy than they let on.
It shows us that they place inordinate importance in the level of the markets, more so than any other indicator.
That they attach great importance to the market' s performance because it is evident to the public, and seems to be a real indicator of improvement of the economy, unlike most of the other indicators posing as so-called statistics, which can be fasified.
That they use the market indicators to promote the belief that we are in a recovery, and that this belief - something most fragile - is the only real 'tool' they really have. For this reason they intervene at the drop of a hat.
That these clumsily obvious remarks put out by Bullard smacked of desperation, promoting considerable cynicism in the investing public, so soon the lies will no longer be believed.
That if they keep on with these tricks, not to mention the enormous damage done by the QE program as a whole, belief in the Fed will be shattered, and the levitating stock market will have nothing left to underpin it, with the real problems of uncontrollable debt of truly magnitudinous proportions, coming home to roost.
The Fed's reflating of the asset bubbles that popped in 2008 is the economic recovery.
DeleteThe Fed does not care about data like the unemployment targets that they have now exceeded, they care about the markets and keeping the air in the reflated bubbles.
If the air comes out of the balloons the economic recovery is over.
The Fed is showing they are market dependent not data dependent.
Peter; Could not have said it better myself. Very sad.
ReplyDeleteThe "Greenspan Put" became the "Bernanke Put" that is now the "Yellen Put" - it must be part of the job requirement now...
DeleteYellen is also expressing "great concerns" of income inequality.
http://www.marketwatch.com/story/yellen-says-shes-greatly-concerned-by-rising-inequality-2014-10-17
Will Yellen also try to "fix" this issue with new and creative policy actions? The ironic thing about this "concern" is that the previous Fed actions are not blameless for the disparity in incomes and the punishment of savers through their low rate policies. Who knows what they will pull out of the hat in the next meeting. Maybe they will announce a new expanded experiment to force banks to loosen lending to small business or the disadvantaged masses... anything to level the playing field. Have to expect more volatility ahead as Fed policy action transitions and Fed speak attempts to appease the markets.
It is all okay so do not panic as Mark will post soon to inform us all of the economic miracle we are part of where share prices can only rise and rise. Oh know wait a minute they have just bombed!!!! My what is going on, can this really be possible?
ReplyDelete@David B- Highest close of $INDU was 17,279, Friday's close was 16,380. So if you consider 5% below all time highs bombed, you must have some tight stops in place.
ReplyDeleteIts easy to think of the fed's antics as gov't intervention, but don't forget who they really represent. They will only keep the market afloat if it is in the best interests of the banks that make up the fed. Who's to say , they won't at some point accumulate huge short positions and let the market crash, economy be damned.
ReplyDeletetrue
DeleteAnother laugher from kwn, who also needs an editor, as he comes up with another internationally known expert that he can not even spell correctly, and I just laugh and laugh. Go to the website and there is no mention of the boy graduating, or of what banks and so forth that he worked for. But, hey , he is the ceo of whatever and so forth in rural Wisconsin. (his Mom's basement out at the farm) You will not see Stockman, Faber, Zulauf, Rogers here anymore, and that is for sure. But new donkeys are always welcome, right Eric Clown King??
ReplyDeleteThe Fed's recent wild comments about QE4 and the like show its desperation to stop the markets falling. It may work this time, but will it work the next, and the next? Eventually they will lose all credibility. Machiavelli said in 'The Prince' that you should never lie to the people, because one day when there is a really serious situation and you have to lie, no one will believe you. So it is with the Fed as they run out of lying power to prop up the markets. Also, number one rule in poker is to never show your hand!
ReplyDelete