"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, October 10, 2014

Russell 2000 a Harbinger to come?

Yesterday I was able to post a chart of the Russell 2000 noting that today's close was going to be a big deal in regards to its overall technical condition. Would the index be able to find enough willing and able buyers near the support zone that has served to hold it for over a year now or would the bears finally be able to break the back of the bulls.

I guess that questioned was answered today.

Take a look at the extremely poor WEEKLY close on the chart. Note that it fell well below the support zone and in the process confirmed a DOUBLE TOP on the chart.

The question is now what? Here is my read on this. The bulls must immediately, before the end of trading next Friday recapture the broken support zone near and just above 1080 or the bears will have them.

Downside - there is some light support near 1040 that might spark some short covering but stronger support does not show up on this chart until closer to the 1000 mark, which I might add is a big psychological number. It also happens to correspond to the 25% Fibonacci retracement level of the entire move off the 2009 low and a band of horizontal support that comes in closer to 1012-1008.

Suffice it to say that the close today does not bode well for early next week. The mantra of buying the dip in equities looks like it is going to be tested.

One quick thing and I am done for just now as this has been one of the busiest days I have experienced in some time what with a MAJOR USDA Supply and Demand report for the Grains, ( and the livestock markets I might add), as well as some wild swings in wheat, etc. I will get some stuff up about these later on as my schedule permits.

For now, I am also noting that once again, gold was saved by its safe haven status as the metal began recovering from its worst levels by the swooning equity markets and the bonds which once again SOARED higher as money went rushing into US Treasuries. Also, right on time, as if clockwork, the Yen scooted higher as more of the risk trades were taken off and that particular carry trade was unwound.

The Euro however did not fare so well as once again it was "let's beat the snot out of the Euro" trade resumed. As said yesterday, FOMC (Central Banks) can only talk up currencies so much or talk them down before fundamentals take over. All the Fed did was give those who were looking for a lower level at which to buy the Dollar or a higher level at which to sell the Euro a huge gift to do just that.

Sadly for the bullish cause for gold however, the HUI and the GDXJ continue to go "Kerplunk!" along with the rest of the equity markets. The latter actually held up a bit better than the HUI did as it was down only 1.22% today compared to a loss of 2.44% in the HUI. Both charts are not especially promising; however, at least they remain above the lows made on the FOMC day this week ( Wednesday). Bulls might take some consolation in that but a mere 5 points off a multi-year low is not exactly a lot to crow about right now. That level is going to take on a lot of significance as we move forward. If it fails, another leg lower is coming. Let's hope for the long-suffering bulls that is not the case but with deflationary concerns rapidly rising, it is certainly possible that those lows will not hold.

Also, while crude oil was able to bounce somewhat off its overnight lows, near 83.50, it still looks iffy. Gasoline was trounced and beaten with an ugly stick today as it made yet another fresh 4 year low in price. I am quite happy with that to be honest.

Cattle rebounded when news of firm cash hit the market which saved the complex from the beating it took earlier but USDA also showed an increase in red meat production for next year and for poultry, something which I have been saying for some time now.

What that tells me is that red meat prices are coming down for sure. I had expected beef prices to start coming down by the 4th quarter as well as pork. Beef is holding better than I expected thus far but pork looks like it is beginning to weaken. There  is going to be too much competition from pork and poultry in 2015 for it to stay up here in the stratosphere.

With the combination of cheaper gasoline and falling red meat prices, it looks like more Bar-b-Q is on the menu at my household once more. Then again, the way things are looking with this cursed Ebola virus, maybe all of us will be scared to death to even venture out of the door so cheap gasoline will not matter much!

I will get the grain stuff up later as there is a lot to cover....\


  1. Remember, if you still have profits...Touch Them!!! haha


    1. In my view the only thing that can stop the continued bleeding in equities if if we get a strong showing in earnings reports.

    2. most xlnt Dan!
      ...looking forward to the sunday pre-open research!

      686 trading days since SPX last touched the 200-day moving average (on Nov. 20, 2012). Longest stretch in history. Missed today by 1 pt... INDU got under it's 200-day today.

      VIX above 20 for the 1st time in 6 months had SPX 1 month later: 1/9/86: +4.1% 8/2/89: +2.1% 3/31/94: +1.6% 3/8/96: +1.4% 6/8/06: +0.8% 4/3/07: +4.6%

      george did alot on russell and also on gold today:


    3. Doubt that even strong earnings will save equities Bob, the markets look to be moving on the bad macro deflation news and the fact that QE is ending again for the third time now.

      Only thing that will save equities is QE4 or perhaps if the Fed announces officially that no interest rate hikes will take place next year.

      Of course the Fed has been bluffing about interest rate hikes all along as they know there is no consumer driven recovery happening.

  2. When entering your live cattle position do you use globex or cme?

    1. dfly;

      Cattle trade on the Globex AT the CME. Each contract represents 40,000 pounds. Many years ago, back in the age of the dinosaurs it seems, finished cattle weighed around 1000 pounds and you could fit 40 of them in a single railroad cars. That is why we old time cattle traders still refer to buying or selling cattle as buying or selling cars.

      I will tell you something about cattle - they trade completely different, as do the hogs, than the grains or gold or silver or any other commodity for that matter. That is because the price is set every single week and can vary quite widely depending on beef demand and packer demand for the animals which can fluctuate quite rapidly from week to week. With hogs the prices paid in the cash markets can swing wildly from DAY TO DAY!

      Reversals are quite violent and often quite unexpected. Be careful if you decide to trade them.

    2. Thanks Dan. I think I will just paper trade cattle for now.

    3. dfly;

      That is an excellent choice! Cattle can drive you absolutely batty and even those who know this market well can be confounded by it at times.

  3. The multiplier for Live Cattle is 40,000?? That seems ridiculously high?

  4. Where's Mark? Miss the buy the dip mantra. I knew we were near the end when "I" was thinking "hey Mark's been right and my cash just sits there, maybe I should join"?

    Then I woke up, for an android, 2 seconds can feel like a lifetime.

    Happy Thanksgiving to fellows north of the border

    1. Ha! My thoughts exactly......."Stay in the system."
      I sold out a few days ago.
      The most valued advice I've gotten from Dan the last couple years is that the robots are chasing stocks all over the place, all the time. Take your profits quickly, the robots can change things on a dime.

      Gold was up a few dollars the other day and the short covering and pounding of the gold short stocks got phenominal!

  5. flurple; maybe I am just a Hoosier, but I am selling into all rallies; having said that, gold and silver will frustrate here in the meantime; 1180-1230 range and nothing new to talk about unless you are a KWN KLOWN fan

  6. over in the kwn sewer, this clown Roberts is talking again; if any of you think he can trade the mkts, just call easy al greenspan and ask the two of them for their recent 2 year audited track records; donkeys

  7. Looking at that chart and all the volitility (VIX and multi hundred point Dow moves) makes me few even more like taking some profits.

  8. Flurple, Mark will be back posting here again when his beloved central banks come back with more QE to try and drive the stock markets to world record highs again.

    Marks says "its never been so easy for central banks" heck so they might as well just start another round of QE now, why wait? Its easy right?

    As one of the other posters here said previously, Mark will not come back if the stock markets keep tanking.

  9. Has anyone noticed that Harvey Organs blog has mysteriously vanished....

    1. Marvin;

      If I were him, and had made such recent ridiculous price claims for the precious metals, I too would choose to disappear.


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