02/16/2013 Weekend Update

[Mr. BachNut]

SKEW update.

SKEW reached the thin air this week and is at peaking levels.
The pop this week is interesting in so far as it suggests risk insurance was bid even though the SPX didn't do much.

Based on prior experience, it is probable we shall see a correction warning (weekly close below moving average) issue this coming week though it could slip to next.
While it is possible an actual correction could start this week, the signal (if it is not a dud) usually arrives before the correction gets going.
So, I would say the current state of play on SKEW kinda fits what Cobra is suggesting in his evil plan timing wise (a little down, then retest high, then correction).

SKEW 021513.jpg

Thanks for posting the update on SKEW weekly Mr. Bachnut. Do you consider an intraweek cross a signal or does Mr. BachNut wait for end of week for confirmation?

I use other signals to trade. I use SKEW to give me a heads up as well as confidence in a directional view.
In that context, I do consider an intraweek cross, particularly if circumstances suggest the cross may hold to the end of the week.
However, I view the end of week close as special because it reflects levels traders are willing to hold over the weekend.
To a degree, the intra-week mischief of algos, HFT and the Operators (not to mention quick hands like Cobra, Al Dente, Bull Bear 52, and the rest of you) is out of the market by or at the Friday close.

I have been fiddling with more precise SKEW reads and possible trade setups but so far have found it better as an auxiliary thing.

There is an astute segment of the market that appears to be good at anticipating potential corrections and buying out of the money options.
High SKEWs appear to be a tell that these guys are setting up for a move. That is all.
It does not tell you that a correction has started or even precisely when it will start and from what level. Though if these guys are setting up, it is probably soon unless they are wrong.
Also, on any given day, there are a number of factors that affect option prices and thus SKEW. So, the technical challenge is to tease out a usable signal from a lot of noise.
The weekly look against a MA seems like it kinda works enough to be worthwhile tracking.

[uempel]

Al, I never look at gold and DAX
What's interesting about Clark's idea is that gold and CHF are both risk-off...

$GOLD priced in Swiss Franc's. Possible Dome? Dome experts, what are your thoughts?

Clark
Could u explain the thinking in pricing gold in swiss francs? Uempel prices it in $DAX, you in $XSF. Dang, I don’t understand either one... thx

ps: I’m reading lots of gold-bug chatter on the net about dip-buying here, and bottom fishing (NOT me; I have to be late).
Here is last week’s short interest report (it is ALWAYS stale). Note the 300% increase in NUGT shorts: they were right this time,
but such high short-interest (3 million shares, plus more recently) should produce some sizeable NUGT squeezes going forward…
http://online.wsj.com/mdc/public/page/2 ... tml#shortD

pps: Whales are reportedly dumping gold. Filings show that George Soros, Julian Robertson and Pimco sold gold during Q4.
But Bill Gross (Pimco) was seen on 1/28/13 recommending GLD for 2013 portfolios.

Our favorite $BPGDM still says “wait”....and cobra’s fave GDX:GLD ratio says “wait”... but both can absorb bounces...

217gdx.png

[Al_Dente]

Al, I never look at gold and DAX What's interesting about Clark's idea is that gold and CHF are both risk-off...

thanks uemp
i made a mistake: you had priced dax in usd last week (or earlier?); i'm still trying to get a grip on that one
[as u know i hang on yr every word/chart, no bs]
also thx for the other stuff
luv u

[KeiZai]

KeiZai, are you doing anything with /NG? looks like a good short to me.

UNG looks like it will fall off to no man's land. I'll want to see a break out from this down slope before thinking about it again.

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The attachment 1.JPG is no longer available

Yes shorting the rallies So far all TF are bearish so I need to see strong up leg to change my mind and try long ....Agree with u about commodities something is wrong out there they may be are telling us that this most obvious HnS in dollar is actually not HnS (frankly I wouldn't be surprised to see "neckline" breakdown with massive retail trap so many retail money is willing to short it and big players like easy money )

So far this is not my prefered count but as u said thanks god we don't have a currency war, if we had then it would not be impossible

The other reason why I am starting to be very cautious in risk assets is DAX, this structure can be already done and if so then it's hard to imagine weakness in Europe without affecting the rest of the world

next weeks are gonna be very interesting

[KeiZai]

$GOLD Weekly. Playing with curved lines for support. Notice ChiOsc, this is weekly so the signal for be as far as a couple months from now...

$GOLD will depend on how Dollar play out, got negative D on UUP, but dollars always got way to surprise people, here my historic GLD support, oversold but it's like catching a falling knife.

Oh I forgot to post something on gold too

Failed to break above DEMA 150 as I was worried so In BEST case we are in similar pattern as last year...not looking very sexy atm

[Al_Dente]

Written 13 Feb when gold was 1650:

Morgan Stanley thinks gold will rise to about 1775 in 2013, and then to 1845 in 2014. It has a trailing 1-year high/low range of approximately 1540 to 1790. [Could u cover your arse a bit more here, please?]

Goldman Sachs thinks gold will rise in the early part of 2013 to about 1825 during the US debt ceiling and sequestration debates, and then decline in the second half as the U.S. economy improves, reaching 1750 by 2014.

Felix Zulauf of Zulauf Asset Management, Zurich, believes that if gold goes above 1750 to 1800, and negative-real-interest-rates continue,
gold will go to 2200 by 2014

[$GOLD closed Friday at 1611]

[uempel]

Al, I guess you mean this chart:

I've got another chart which shows the divergence much better. DAX Renko has broken down, presumably the index is heading for a new low below 7500. And SPX EMA3, which was a fine lead indicator for DAX traders these last few months, has lost that property.

Al, I never look at gold and DAX What's interesting about Clark's idea is that gold and CHF are both risk-off...

thanks uemp
i made a mistake: you had priced dax in usd last week (or earlier?); i'm still trying to get a grip on that one
[as u know i hang on yr every word/chart, no bs]
also thx for the other stuff
luv u

[ClarkW]

$GOLD priced in Swiss Franc's. Possible Dome? Dome experts, what are your thoughts?

Clark
Could u explain the thinking in pricing gold in swiss francs? Uempel prices it in $DAX, you in $XSF. Dang, I don’t understand either one... thx

ps: I’m reading lots of gold-bug chatter on the net about dip-buying here, and bottom fishing (NOT me; I have to be late).
Here is last week’s short interest report (it is ALWAYS stale). Note the 300% increase in NUGT shorts: they were right this time,
but such high short-interest (3 million shares, plus more recently) should produce some sizeable NUGT squeezes going forward…
http://online.wsj.com/mdc/public/page/2 ... tml#shortD

pps: Whales are reportedly dumping gold. Filings show that George Soros, Julian Robertson and Pimco sold gold during Q4.
But Bill Gross (Pimco) was seen on 1/28/13 recommending GLD for 2013 portfolios.

Our favorite $BPGDM still says “wait”....and cobra’s fave GDX:GLD ratio says “wait”... but both can absorb bounces...

217gdx.png

I don't have a position in $GOLD and don't know that I will, more likely to short after a bounce than anything. The idea of pricing in Swiss Francs is from PeterLBrandt.com. He believes pricing it in Swiss is a "leading indicator". Here's a November article stating such http://peterlbrandt.com/gold-is-in-a-ne ... nt-charts/

[uempel]

Al_Dente, early Sunday morning I showed a chart which suggests that Gold ain't attractive as a long term investment. Apparently the big banks think differently I recall an article in a Morgan Stanley newsletter in 2003 or 2004. Their call was: We don't like gold and we think it's a stupid investment, but we note that gold shows a bullish TA pattern and is heading higher. I don't remember who wrote that, Barton Biggs? Byron Wien? but he sure was right,,,

Written 13 Feb when gold was 1650:

Morgan Stanley thinks gold will rise to about 1775 in 2013, and then to 1845 in 2014. It has a trailing 1-year high/low range of approximately 1540 to 1790. [Could u cover your arse a bit more here, please?]

Goldman Sachs thinks gold will rise in the early part of 2013 to about 1825 during the US debt ceiling and sequestration debates, and then decline in the second half as the U.S. economy improves, reaching 1750 by 2014.

Felix Zulauf of Zulauf Asset Management, Zurich, believes that if gold goes above 1750 to 1800, and negative-real-interest-rates continue,
gold will go to 2200 by 2014

[$GOLD closed Friday at 1611]

[Al_Dente]

I've got another chart which shows the divergence much better. DAX Renko has broken down, presumably the index is heading for a new low below 7500. And SPX EMA3, which was a fine lead indicator for DAX traders these last few months, has lost that property.

uempel that one is brilliant thanks, i immediately stole it and transferred it to my old "waverider" renko template.
it really looks like it is saying bye bye spy

ps THANKS CLARKW appreciate the peter link, i'll devour it later, bye

[TraderJoe]

Interesting;
Facebook, Coolest Cutest Corporate Welfare Queen Of Them All

http://www.testosteronepit.com/home/201 ... m-all.html

and
What Do They Know That We Don’t?
http://www.testosteronepit.com/home/201 ... -dont.html

[Royal Flush]

Thanks for the comprehensive explaination Mr. BachNut, despite it's shortcommings (pardon the pun) SKEW appears like an excellent swing top indicator.

SKEW update.

SKEW reached the thin air this week and is at peaking levels.
The pop this week is interesting in so far as it suggests risk insurance was bid even though the SPX didn't do much.

Based on prior experience, it is probable we shall see a correction warning (weekly close below moving average) issue this coming week though it could slip to next.
While it is possible an actual correction could start this week, the signal (if it is not a dud) usually arrives before the correction gets going.
So, I would say the current state of play on SKEW kinda fits what Cobra is suggesting in his evil plan timing wise (a little down, then retest high, then correction).

SKEW 021513.jpg

Thanks for posting the update on SKEW weekly Mr. Bachnut. Do you consider an intraweek cross a signal or does Mr. BachNut wait for end of week for confirmation?

I use other signals to trade. I use SKEW to give me a heads up as well as confidence in a directional view.
In that context, I do consider an intraweek cross, particularly if circumstances suggest the cross may hold to the end of the week.
However, I view the end of week close as special because it reflects levels traders are willing to hold over the weekend.
To a degree, the intra-week mischief of algos, HFT and the Operators (not to mention quick hands like Cobra, Al Dente, Bull Bear 52, and the rest of you) is out of the market by or at the Friday close.

I have been fiddling with more precise SKEW reads and possible trade setups but so far have found it better as an auxiliary thing.

There is an astute segment of the market that appears to be good at anticipating potential corrections and buying out of the money options.
High SKEWs appear to be a tell that these guys are setting up for a move. That is all.
It does not tell you that a correction has started or even precisely when it will start and from what level. Though if these guys are setting up, it is probably soon unless they are wrong.
Also, on any given day, there are a number of factors that affect option prices and thus SKEW. So, the technical challenge is to tease out a usable signal from a lot of noise.
The weekly look against a MA seems like it kinda works enough to be worthwhile tracking.

[Al_Dente]

HAPPY PRESIDENT’S DAY TO ALL

But u can believe this: https://stockcharts.com/public/1684859/

And this: http://www.youtube.com/watch?v=GGlKJDEI1Nk

[Mr. BachNut]

$GOLD priced in Swiss Franc's. Possible Dome? Dome experts, what are your thoughts?

Clark
Could u explain the thinking in pricing gold in swiss francs? Uempel prices it in $DAX, you in $XSF. Dang, I don’t understand either one... thx

ps: I’m reading lots of gold-bug chatter on the net about dip-buying here, and bottom fishing (NOT me; I have to be late).
Here is last week’s short interest report (it is ALWAYS stale). Note the 300% increase in NUGT shorts: they were right this time,
but such high short-interest (3 million shares, plus more recently) should produce some sizeable NUGT squeezes going forward…
http://online.wsj.com/mdc/public/page/2 ... tml#shortD

pps: Whales are reportedly dumping gold. Filings show that George Soros, Julian Robertson and Pimco sold gold during Q4.
But Bill Gross (Pimco) was seen on 1/28/13 recommending GLD for 2013 portfolios.

Our favorite $BPGDM still says “wait”....and cobra’s fave GDX:GLD ratio says “wait”... but both can absorb bounces...

I don't have a position in $GOLD and don't know that I will, more likely to short after a bounce than anything. The idea of pricing in Swiss Francs is from PeterLBrandt.com. He believes pricing it in Swiss is a "leading indicator". Here's a November article stating such http://peterlbrandt.com/gold-is-in-a-ne ... nt-charts/

Until the Swiss started managing CHF against EUR, I viewed CHF as paper gold. That is it was a sound well managed currency. So, comparing gold against it provided some insight into the fundamental strength of the gold market. Now the SNB has a floor on EUR/CHF and for a good part of last year CHF traded with the EUR. So, I think the Gold/CHF chart got corrupted. I have been thinking of looking at Gold/Singapore $ as a possible alternative or maybe some other currency but haven't gotten around to it.

BTW, I am a pupil of Peter Brandt's and have huge admiration for him. He has helped me A LOT. His use of classical chart patterns to set up asymmetric trade opportunities and his approach to risk management and managing trading as a business are highly worthy of emulation. IMO, he is among the great traders that students of the market should study. It is important to be aware though when you read his blog posts that his win % is often around 40%, which is to say probably wrong statistically. He is quick to point out that his views are possibilities not predictions. The key to his success is not so much the win % but trade setups that have 3, 4, 5 or more to 1 reward to risk ratios. So, the big winners more than cover a lot of small losers.

I believe his current focus concerning the gold chart is not gold/CHF but the huge rectangle that has been forming over the last year and a half. He will long or short a breakout of that pattern with a target roughly equal to the width of the rectangle. He will scale the trade to risk on the order of 1% of capital based on a stop around the high or low of the day before the breakout. Sounds simple...

[Al_Dente]

Thanks Mr. Bachnut

OT
“Regulator Probes Dark Pools”
http://online.wsj.com/article/SB1000142 ... lenews_wsj

If u r interested in “trading in the dark,” it’s worth the extra 10 seconds it takes to bypass any subscription block:
Copy and paste the headline in the search window at news.google.com
Click the search button (the magnifying glass). It should come up as a clickable article that you can fully read

[Al_Dente]

PAGING REAL ESTATE:

B. Wayne Hughes, who founded Public Storage (PSA) 40 years ago, is buying real estate, mostly at foreclosure auctions, to rent to the folks who find homeownership out of reach. He has purchased about 10,000 properties through his firm, which is now the second-biggest owner of single-family rentals after Schwarzman’s Blackstone Group. Hughes incorporated his new firm last year as a non-public REIT.
These firms are helping to drive the recovery…

[In the old days, they called this a “Vulture Fund.”]

http://www.bloomberg.com/news/2013-02-1 ... -king.html

btw: Key housing reports to be released this week: Housing starts on Wednesday, Existing home sales on Thursday, the homebuilder confidence survey on Tuesday, and the Q4 MBA National Mortgage Delinquency Survey on Thursday…

[uempel]

Charts I'm looking at today: long term yields, long term gold and long term SPX. Note that Gold was fixed at $35 until 1971, note that in October 1979 Paul Volcker strangled inflation by reducing money supply.

As stockcharts doesn't provide data prior to 1993, the first three charts are kind of disjointed, doesn't make them less interesting.

Clearly visible in the last chart is the joint rally of Treasuries, gold and equities since 2009

Zero Coupon yield

Gold

SPX

The last 20 years

[Al_Dente]

THANKS uempel
Here is your exact “joint rally of Treasuries, gold and equities since 2009” chart
Opened up to 1975
(this won’t end well, will it?)

[uempel]

THANKS uempel
Here is your exact “joint rally of Treasuries, gold and equities since 2009” chart
Opened up to 1975
(this won’t end well, will it?)

218uempel30yr.png

Thanks so much! I guess I'll move to stockcharts-pro, I did not know that they provided data prior to the 20 year limit!

As to your statement about a bad end: CPI increased five-fold since 1975, so the dramatic rallies of the three indices are less spectacular than your visual suggests.

The bad end might be that household income in real money has been declining for more than 10 years. Wiki writes: While per-capita disposable income has increased 469% since 1972, it has only increased moderately when inflation is considered. In 1972, disposable personal income was determined to be $4,129; $19,385 in 2005 dollars. In 2005, disposable personal income was, however, $27,640, a 43% increase. Since the late 1990s, household income has fallen slightly.

[Al_Dente]

“Oh just give us the stupid washout already… The 'Correction Camp' is now the world's largest circlejerk as measured by circumference, according to Guinness. The chief strategist types are all charting the shit out of this … Chris Ebert at ZenTrader pulled this LSSI metric out of his ass this weekend
[see embedded link]. I guess, fine. We know that the Vix is certainly predictive of nothing, maybe we all need to watch the LSSI now. Sure. I'll add it to the list of 700 indicators… This comes at a time when we're about to get deep into this Sequestration bullshit… Bring it. F**k it….I have more buying to do anyway. Let's correct already and be done with it.”

http://www.thereformedbroker.com/2013/0 ... illing-me/