What's this?

30 yr.

This is ugly and not good. The 10 yr is not confirming on my metrics (yet), but this really bears watching. Rising yields will puncture this BS equity rally fast.

Wednesday Update

Jason over at SentimentTrader.com has put out some interesting stats this morning. Considering his musings and the fact that China is in the process of breaking down, I will probably call the Santa rally over (for me) if SPX breaks below 1112.

Everything is so thin this time of year it doesn't make sense to do much... certainly nothing big.

Crude is up a percent today waiting for an expected bullish inventory report.

Key Level

Look out for China!

Important post

Great post by Mish. Highly recommended!

http://globaleconomicanalysis.blogspot.com/2009/12/fictional-reserve-lending-and-myth-of.html

Target

Lets see if we can't hit the TD Wave projection around 1130+ on the SPX before the holiday seasonal period is done. In a post below I pointed out the TD Combo countdown need another two weeks of higher highs and higher closes. On the cash SPX it only needs one more.

What bothers me is that I hear more and more people calling for a correction to start the year.

Friday Update

Still in the slop for stocks. Still have positive seasonals but continued trading below 1100 for SPX or 600 on R2K may bring in sellers wanting to lock in this years gains. Real selling to occur below 1080 on SPX I would guess, if we get that far.

Update

This morning is interesting in that we are at price levels in the big indices that, if they give, could beget more selling and maybe the abandonment of the Santa Clause rally. As of now, I still think Santa Clause is coming to town. Look at the weekly chart with TD Combo on it. It needs two more weeks of higher highs and higher closes to generate a 13 count. Absolutely nothing says this has to happen; but its a decent set up.

Euro

In 10 days we have taken out 13 weeks of upside. The currency game is a relative one. The Dollar is not some island of stability but there are PLENTY of problems out there, and sometimes the ole buck stacks up OK.

Update

Still lightly long as seasonals are positive for this time of the year. The AD line and Tannies on the NYSE also help me stick with a small position that I fundamentally can not stand. The AD line on the Naz is terrible and the SOX have put in an ugly daily candle. The Naz is OB relative the the SP on the monthlies so I will be looking hard at that as a short candidate going into the new year.

Also, remeber how 666 marked the lows in the SPX in March. Well look at the Russell 2000's 62.8% retrace level. You guessed it... 666. That's some decent upside for the R2K, but if this year has reinforced anything its that markets can and will do crazy stuff. I personally think that would be a great place to end this 'hell'acious rally. (Sorry; I couldn't resist.)m

Retail Sales

Stocks pre retail sales

This market is like hamburger hill... thus the reason for hanging it up this time of year. I am still playing lightly, but I am losing bias in either direction for the short term. It could come out of this range in either way... but we have come down to a point I would guess. Tomorrow is Friday, and with retail sales to boot.I will safely bet on.... movement!

Albert Edwards made some comments to Barron's as to history and a longer term view:

Albert Edwards, Societe Generale's world-class global strategist, points to the scarcity of bears among the newsletter writers tracked by Investors Intelligence, which last week fell to the lowest level since the stock market peaked in 2007.


"The likelihood is that the next leg of the long-term structural bear market is closer than people realize," he writes in a note to clients.


While Edwards has steadfastly pointed to Japan and its stock and bond markets as the examples the West should study for long-term patterns, he similarly argues that investors could have participated in cyclical rallies of 40%-50% in Tokyo -- even though the Nikkei stands some 75% below its 1989 peak.


The key, he explains, has been to exit the Tokyo stock market when leading indicators for the Japanese economy show signs of topping out. That's usually just about the time analysts start to argue that the economy, at long last, is about to embark on a sustained expansion. Which has yet to happen.

The Dollar and the BDI

One could make the case that turns in the Baltic Dry are associated with turns in the buck...

Thursday morning

According to SentimentTrader.com, " The S&P 500 has gone 22 days without a 2% deviation, the longest streak since July '07." Tight range!

It didn't break yesterday, although it got close. I've still got a little long because its December, the SOX is acting really well vs the SPX, and the cycles are bullish for a little longer. Fundamentally, I hate this market so if it starts to break down, I will not argue.

Another thing to consider is the Dollar (see my earlier post for technicals). It appears to have bottomed. It could easily retrace a little bit of its recent move, but odds are its put in an intermediate bottom which should be measured in weeks and months.

Wednesday morning

Fears of Greece debt default (a continuation of Dubai) has the dollar up and stocks off this morning. We are approaching price levels on the indices that would suggest a biggger down move is in the works.

Tuesday Update

Chop, Chop, Chop. Holiday trading. This market isn't going down and I am now flat and actually looking to get slightly long for the end of the year. SPX close below 1085 would probably make me change my mind, but given the SOX and the seasonal time period I am willing to try for a few points on the upside. No real position mind you, still too many danger signs for that.

I know of some very good traders who pretty much shut down for this time of the year. Its probably a good idea.

Stocks

This has been a range bound, choppy market for weeks. The thing that really bothers me (from a bearish perspective) is that we had a few failures last week (one day after another) and the market just never followed through. I do think stock is being distributed, but the fact that the indices will not 'die' given ample opportunity makes me nervous considering the time of year. I must admit that I have been debating just getting flat tonight, and maybe even partially long tomorrow for some sort of year end rally. Friday close should have been much much worse. I think I will just watch tomorrow though. There is the Dollar to consider too. But I am itchy and and somewhat uncomfortable with my position in all honesty.... and I could flip by the close tomorrow.

Amen!

Preaching the truth!!

http://www.ritholtz.com/blog/2009/12/saving-banks-not-banking-2nd-lien-version/

Dollar

There is a lot of talk about a possible dollar bottom, and its implications on other markets. The negative correlation on many markets has been persistent and relentless. I have posted many times that 'its all one trade.' Well, Friday does show technical evidence of a bottom. But its Sunday night, and we all know what usually happens on Sunday night. (Usually dollars get sold.)

From a TD Wave count perspective you can see that it is very possible that a B Wave concluded on the weeklies at a projected area. Same on the daily chart. Also, TD Sequential generated a buy signal last week on the daily chart. Friday closed over resistance. Its interesting and worth paying attention to.

NFP

Pretty good report this morning. All the headline numbers were better than expectations and the market is loving it. We will see if it can maintain the enthusiasm. Big moves off of NFP are usually faded in the days that follow.

Friday

Big NFP number today. Expectations seem to be around down -100k to down a little more like -125k. I always get a kick out of the BLS birth/death adjustment. Seriously, its sad. People really knock themselves out to trade on this number but its become meaningless with the revision and the birth/death. But the market sure does like to move around on it.

Two charts today. One is one of concern for the shorts. JNK did not participate at all yesterday. Now, the up volume vs down volume chart is a little messy. I put lines on it to show where the market is (usually) after a run up in down volume vs up volume (since the March lows) like we have seen recently. Usually, its much lower... at the bottom of a decent correction. Well now we are at the highs. That, by my way of thinking, is distribution.

Close

Well we got the reversal. Lets see what sort of follow through there is. Payrolls tomorrow. Goldman must not have liked the number they got from the government. :)

Noon

Another tail after the morning session. If we can trade below today's lows we could probably get some down side going. Otherwise its new highs baby. I am still holding my shorts and should know by the afternoon if I need to take them off. Frustrating market.

Open

Another pump/ramp and selling into. We may break out the next minute and go to 1180 on the SPX, but it sure does seem to me that 'someone' is creating activity in the morning and then selling/distributing into it.

Gold

Whenever we had traded 20% above 30 week average in this bull run we have experienced a sizable pullback. Like now.

Thursday

This morning things are looking as if I am going to be wrong. Yesterday had good breadth by the AD line and the SOX have been outperforming in a big way for the last couple of days. TF futures are @600 now. If JNK trades above 38 and and ES takes out its recent highs and TF maintains 600 I will have to call it what it is (a loser) and get out.

ES now

Okay. TF futs barely poked their nose above 600 to 600.30. I held on to that. Now look at the ES. This 6 hour bar closes at 12:00 and it looks like it will be red and below the TDST level. I am going back in with the idea that the highs today are not taken out.

I have written many times that I believe some big boys are creating activity in the mornings to unload some inventory.

This may not work out but I will soon find out.

Bitter End

The R2K still hasn't taken out the 600 level... but when that happens I will cover it and it is my last short.

Hiring and Firing

Challenger's count of layoff intentions slipped to 50,349 in November vs. October's 55,679. In a reminder of how much layoffs have eased, the year-ago total for November was 181,671. But a bad sign is a lack of hiring intentions, totalling only 10,076 in the month vs. October's 57,520.

ADP estimates November private payrolls will drop 169,000.

Monday Night

Not the Monday I wanted... but it certainly was no surprise either. The last few weeks have been one big range trade, but we still haven't broken out on the S&P, nor the Naz. The small caps as represented by the R2K is way back there (but has a nice bottom formation). Anyway... I am going to hang in for now. I did get a little smaller today.

Update

SPX filling 1110 gap now. Action after this is crucial.

Dollar

Approaching lows.... and commodities like copper, crude, and gold moving up. But look at the 2 year! Rates going lower? hyper-inflation... but not.

Caution

SP futures are over 1100 this morning so SPX should open above there as well. Gold is bumping its nose on 1200. We are still filling a gap, but extended trading in this zone is bullish. I have posted some charts that show signs that we still could see the year end rally. The AD line did not confirm the recent sell off, and the volume line has crossed back above zero and its longer moving average. The small caps could be forming a base here, off which they could try for new highs. Like I said, we are still just filling gaps so far, but I would feel a whole lot better if this open is sold. If its not, I will have to seriously consider getting smaller.

I remember back in the summer of 2007, we were dealt some pretty serious blows in the credit markets. The stock markets sold off hard, but then rebounded to test or surpass old highs into October. Maybe Dubai is sort of like that. Its a blatant symptom of the credit bubble and what it left behind, and one would think that it would make people at least think about what is really out there, but equities may just decide to keep partying.

Sunday night

The Aussie Dollar has opened up strong. As a short, that does not give me a warm and fuzzy feeling.

Market Outlook

Friday had some horrible breadth reading, but over all volume was still holiday light. Many international markets seemed to take it worse on a percentage decline basis than we did. It sure did seem like someone came in right at the open and started buying futures to support the market. I have pointed out the declining breadth and divergences that have shown themselves over the last couple weeks. A leader stock like Goldman has lagged badly, as have the SOX, and the emerging markets at the most recent high. Many foreign markets did not confirm that high and have lagged our DJIA.

The Dubai news is just that... news. I am not surprised by it, and as I wrote earlier, I seriously doubt that this will be the last entity that is unable to roll its debt before this credit cycle comes to its contractionary conclusion. It may be the grain of sand that starts a little avalanche however. We will just have to wait and see. Its interesting to note that TBills traded negative a few days before this news item hit the wires. Think anyone knew there was a credit event on the horizon?

Right now, I think many managers may be more than happy to lock up this year and fore go the possibility of a Santa Claus rally. I also think that the houses that make up what is left of the Street may need to get their leverage down again. All this adds up to rallies that are sold. There is a big gap above that some may gun for and this being a Sunday night the pattern has been to buy futures in the evening and set up for a big Monday morning. Those big days up are often sold for the rest of the week recently, though (thus my theory on the Street trying to get their balance sheets down). So we may see this play out tomorrow. I am comfortable holding a short through it if need be. If we see that gap filled handily and more than a couple of leaders acting well, I can cover for a small loss. But, generally I look for lower prices at least for a couple of weeks and possibly decent downside. I would think VIX would get closer to 30 and the McLellan Osc to get closer to -70. But those are just guesses. We will just have to see what develops.

Dollar

A TD Sequential Buy generated on the daily chart.

Markets are off Thanksgiving

The news is Dubai. Whatever it is; I seriously doubt Dubai will be the last entity that will be unable to roll its debt before this debt cycle is over.

SPX and R2K are below levels that I have been watching so I am switching to the short side.

The Dollar is a little bit higher, but is having a nice move against the Aussie $. That has been the leader imo.

Happy Thanksgiving to all! This is my favorite holiday. Very little commercialism, no gifts, just family, friends, football, food, and wine! Good times. I hope everyone has a great day today.

Some charts

Wednesday

I still have my small stock long (although it got real close yesterday) and just took off my heating oil short, as it appears we may try to push 'the trade' higher through the thin holiday week. The bulls want their 50% retrace on the SPX, and the bears don't seem to have the moxy to stop them. I am still interested in pursuing a decent correction, but will probably have to wait until next week. Gold relentlessly pushes higher, as the Dollar relentlessly pushes lower. Unless we are in the blow-off move right now (which I doubt) then I would expect a sharp pull back soon.

Distribution

I have posted a silver chart as a commodity example, but look at crude oil too. I actually took a short position in heating oil on the close. Look at the link below for examples of stock distribution. That was a really strong morning that got sold into in a big way across the board. (Of course across the board... its all one trade!) Anyway... I have been thinking.... you know how TBill rates went negative and are still very close to zero? One excuse I have heard for that move is that banks need a really clean balance sheet for the end of the year so they are buying bills. Well, what if what is left of the street needs to get down too? How would you do it? Maybe you could start a bid in the Sunday night thin market and create some good excitement Monday morning... and then spend the rest of the week hitting bids to unload a bloated balance sheet. Maybe.

http://stockcharts.com/scripts/php/candleglance.php?EWA,EWO,EWK,EWC,EWQ,EWG,EWH,EWI,EWJ,EWM,EWW,EWN,EWS,EWP,EWD,EWL,EWU

Put Call Ratio

Lower than the 2007 peak.... don't tell me things aren't a little frothy!

Monday Afternoon

This could be interesting. Russell 2K is now back below 600 and SPX is looking at 1100. Many markets have come well of their highs. I am watching with an itchy trigger finger.

Monday Morning

Every Sunday night into Monday morning they ramp this thing. Its like clockwork. Well, the markets have taken out the gaps I was looking at overhead and appear to at least want to go to 1120 on the SPX. That is the 50% retrace from the whole move down. I got chopped and will play from the long side and see what happens around 1120 (not too far away actually).

Its the same old thing... dollar down, everything else up.

Thanksgiving

Week outlook

Breadth has really deteriorated over the last couple months. There are many ways to see this. I have included two. The A/D line also did not confirm this most recent high and has turned down. Can it turn up here? Sure. The Russell 2000 and the Midcaps are both trying to hold their 20 day average, and there is a nice gap up around 600 in the R2K... right where its 50 day is too. I will be watching 600 in the Russell and 1096-1100 in the SPX.

Although the bias really doesn't hold over the last decade, there is a belief that one wants to be long for the holidays, so that could feed into some buying. It could also disappoint if it doesn't happen. I think there could be a strong desire to lock in some good numbers for the year, after a horrible 2008.

As of now, I am short but I will probably play with a close SAR both ways. I could get chopped a little but for now its the best strategy I can come up with. Fundamentally I remain bearish and think this market is over valued. That thought pattern hasn't paid a dime in the last 7 months though.

Dollar breaking out?

This is short term... but it is how these things start. We will see. Art Cashin is reporting that TBill yields dropped below zero yesterday. I missed that. They are at 1 bp. this morning. That is interesting.

That clears things up

Breadth is very negative. I am short and shorting, and will do so unless this market does what it has done for months now and just turn around and make new highs. Ha! Seriously, if we start taking out yesterdays close on the SPX, I will re-evaluate.

Banks "hiding the salami"

By RODERICK M. HILLS, HARVEY L. PITT
AND DAVID S. RUDER

Independent accounting standards have helped make American capital markets the best in the world. In making financial decisions, investors rely heavily upon the integrity of corporate financial reports prepared in accordance with accounting standards established by the independent Financial Accounting Standards Board (FASB). That board is supervised by the Securities and Exchange Commission (SEC).

Now, the Obama administration is on the verge of transferring accounting standards responsibility from the SEC to a systemic risk regulator. Such a radical move would have extremely negative consequences for our capital markets.

Although there may be good reasons for establishing different regulatory capital standards for financial services firms, those reasons cannot justify dispensing with the FASB's accounting standards. Acting in accord with powers given to it by the Sarbanes-Oxley Act, the SEC has formally recognized the FASB as the definitive standard-setting body, capable of "improving the accuracy and effectiveness of financial reporting and the protection of investors."

The SEC treats accounting standards adopted by the board as authoritative. If the SEC has concerns about, or disagrees with, accounting standards promulgated by the FASB, it can refuse to give them deference.

Today, the American Bankers Association, on behalf of many commercial banks, is seeking to prevent disclosure of the fair value of the financial instruments they own. It is attempting to persuade Congress that the safety and soundness of the banking system will be protected if a systemic risk regulator can prescribe accounting disclosures for financial companies.

The government shouldn't follow their advice. This change might well interfere with efforts by financial firms to raise capital. Investors will assume that the accounting standards they employ are designed to mask risks.

As former chairmen of the Securities and Exchange Commission, we are well aware of the long-held desire of commercial interests to avoid fully disclosing their finances. In the 1990s, business interests opposed publicly disclosing their post-employment pension and health obligations. Similarly, in 2000, efforts were made to prevent the FASB from eliminating distortions that inflated the balance sheet values of newly merged companies, because its elimination might make balance sheets look less favorable to potential investors.

In 1994, the FASB considered requiring companies to reflect the current value of their outstanding stock options. After intense lobbying from certain business interests and pressure from Congress, the FASB decided not to require use of the fair value method. In 2004, when the FASB finally mandated it for valuing stock options, certain U.S. business opponents continued to lobby Congress to overturn that decision.

During times of financial distress, there is always pressure to change accounting standards in order to inflate the value of assets. Under certain circumstances, there may be a legitimate need to recognize that stresses on large financial institutions may threaten the stability of the U.S. financial system. Banking regulators can ease such stresses by reducing regulatory capital requirements. But it would be a mistake to adopt legislation that would allow financial-services firms to hide their true financial positions from investors.

If changes in accounting standards are used to bury significant risks for one purpose, it will not be long before other purposes are asserted to permit further deviations. This is a dangerous path that will only hurt investors and our capital markets.
—Messrs. Hills, Pitt and Ruder are former chairmen of the Securities and Exchange Commission.

Morning Comment

Looks like we are going to open very close to the 1100 are on the SPX. I think this could be an important day. Noting the non-confirming breadth and the over whelming belief, even by bears, that we will go at least a little higher, the action after we establish an opening range could be telling. If we head lower from 1100 it could catch more than a few people on the wrong side. The small caps already look pretty bad, and the breadth on the Naz isn't even close to being kinda-sorta good... it is just plain bad. I will probably beef up my exposure one way or the other after the first hour or so.

Also, the Dollar is trying to peak at an important chart point as I have it. We will see if it can get above it, and stay.

Game on!

Advance Decline Line _ NAZ

Advance Decline Line

not confirming highs here...

Today

I have a tiny (and I do mean teeny) long position on just because the market is going up and we could spike over 1120 this week. I have a pretty close SAR in because I still feel like we are close to a turn in here. I saw an interesting chart last night from Chris Carolan, who now works for EWI so they may have it up too, where there market is making highs just after a new moon and lows around a full moon. That says a top today or tomorrow. I can't put the chart up because its copyrighted, but you can find the dates easily enough and put them on your own chart. Loony market!

A Dollar Observation

The Dollar Index made a new low yesterday for this move... but many other currencies did not make new highs.

Doug Kass writes... "Really?!"

http://www.thestreet.com/story/10627106/1/kass-what-recovery.html

Retail Sales

The October jump in overall sales was led by a 7.4 percent rebound in auto sales after a 14.3 percent plunge in September. Excluding motor vehicles, retail sales improved 0.2 percent, following a 0.4 percent rise in September. The latest number was lower than the consensus forecast for a 0.4 percent gain in October. Excluding motor vehicles and gasoline, retail sales increased 0.3 percent, matching September's gain. Gasoline surprisingly was flat in October, following a 0.9 percent increase the month before.

Outside autos and gasoline, sales were mixed. On the positive side, the biggest gainers were food services & drinking places, up 1.2 percent; nonstore retailers; and miscellaneous store retailers, up 0.9 percent. Two of the biggest losers were those still suffering from the slump in housing. Building materials & garden equipment dropped 2.4 percent while furniture & home furnishings slipped 0.8 percent. Sporting goods, hobby, book, & music store sales fell 1.2 percent.

Overall retail sales on a year-ago basis in October improved sharply to down 1.7 percent, from down 6.3 percent in September. Excluding motor vehicles, the year-on-year rate increased to minus 2.6 percent in October from down 5.3 percent the prior month. The significant improvement in October was due both to a drop in the baseline in October 2008 and the rise in October 2009.

Based on the core of total less autos and gasoline, sales are sluggish although the components were mixed. Today's report shows the consumer still cautious about spending and should weigh on equities-especially with a significantly below expectations showing by the simultaneously release of Empire State manufacturing.

....from Barrons

A nervous short caves

I covered most of my short Friday at the close. The market was simply not selling off... at all. I have covered the rest in tonight's electronic session. There are still a lot of warnings signs, but the fact is the market is not going down and we are now in option expiration week. Not the best time to be short anyway. The dollar is starting lower too.

I will keep watching for price to start confirming my fundamental outlook. As of now, I am fairly market neutral.

FHA Travesty

This is repulsive. How can this be happening? This is not a secret to those who should be overseeing this government agency. Oh, and by the way... the FHA does about 80% of the mortgage market now.

Morning comments

As you can see the broad market has lost relative strength to the SP500 recently and had a meaningful turndown. The problem with yesterday, although breadth was very bad, there just was not a lot of volume.