04/12/2014 Weekend Update

[Al_Dente]

ONE DAY ONLY:
Google Glass goes on sale to the general public on Tuesday, April 15
$1,500
Sales start at 9 a.m. ET
SUPPLIES ARE LIMITED
http://www.cnn.com/2014/04/10/tech/inno ... -april-15/

[Al_Dente]

.....So, two things to watch for (1) ECB news on QE (2) the Fed POMO schedule released at the end of the month.

Yo Flu:
Thanks now I’m on the hunt for any news of ECB QE
This just in an hour ago basically says nothing, just “maybe” and “everything is on the table,” but it’s a decent primer for those folks previously not watching ECB action.
http://www.reuters.com/article/2014/04/ ... HZ20140412

[3DM]

Monday afternoon and Tuesday may see lower than usual activity due to a religious holiday

[gappy]

Yen is the hinge pin.

Capture.PNG

fx.PNG

http://www.japantimes.co.jp/news/2014/0 ... 0moOWpOW00 Here's a clue for Mr. Watanabe; Japan's biggest expense is oil, and it's biggest trade partner is China. And the bric's have Uncle Petrobuck under assault. Who will manage it all better? The colluding countries or the banksters.

[fehro]

A Trip Down Correction Memory Lane
Since weekends offer an opportunity to study markets and improve our approach to investing, it may be helpful to take a quick refresher course on stock market corrections. We will focus on two questions:
1. How far can stocks drop?
2. How long can corrections last? http://www.safehaven.com/article/33447/ ... ntasy-land

[ZimZeb]

Putting the above information together

Nice idea tsf--data mining, old school style. Go team humans!

CC1-1.pdf

(1.44 MiB) Downloaded 174 times

Thanks to all who post TA here. (& thanks to Al_Dente for also allowing me to retire my weekend news feed )

[user13]

.
WARNING --> Some people may construe this post as Conspiracy Related and might be offended. If so, sorry about that.

Here's POMO Projection for the next week:

Day date = = = = = = PROJECTION = = = = = = High Proj
Fri 4/11 = = = = = = 1818 = = = = = = 1848
Mon 4/14 = = = = = = 1822 = = = = = = 1852
Tue 4/15 = = = = = = 1814 = = = = = = 1844
Wed 4/16 = = = = = = 1816 = = = = = = 1846
Thu 4/17 = = = = = = 1809 = = = = = = 1839
Fri Good Friday = = = = = = 1809 = = = = = = 1839
Mon 4/21 = = = = = = 1791 = = = = = = 1821

Note - The High Proj is simply 30 points more than the Projected amount. Typically, the market doesn't get more than 30 points more than the Projected amount. If the market is closer to the High Proj amt, then funds are being borrowed from the future POMO amounts which will eventually cause a greater reaction.
Markets are closed on Friday and NO POMO from Thur 4/17 until Tue (4/21) - meaning the market will want to descend down toward 1791 in this timeframe. They might try to do this as part of OPEX.

April End of Month Projection is 1792.

Observation - This is just something I've noticed - I guess it's all about momentum:
----> If the market closes at a HIGH on OPEX day, the market normally continues higher for at least the next couple of weeks.
----> If the market closes at a LOW on OPEX day, the market normally continues lower for at least the next couple of weeks.

ok - what about the whole Fed Conspiracy stuff.
Here's the deal - I have the utmost respect for the FED. As I've said before, a Strong Market means a Strong USA. If the FED had not acted, the USA would have been vulnerable for some type of action.
So, saying that, I believe in the FED, and the power they have. There's a reason they say 'Don't fight the FED'.

So, how does this relate to POMO? The Fed has been deploying all kinds of extreme measures to help the economy. Through all the interest rate cuts, etc. the market still needed more money in order to come out of the abyss. That's where POMO comes in.

The example is that the Fed is piloting the market - just like flying a plane (btw I got my Private Pilot License back in 2000 and so there's the reason for the analogy). All the Fed has done (except POMO) was not enough to move the market up - just not enough thrust, there's still too much drag. By using POMO, the market has additional thrust. However, with so much drag, it takes a lot of thrust (x amt of POMO) just to keep the plane in level flight (market even). If more than x is used, then the market advances. If less than x, then the market declines.

So, the market naturally wants to go down to some equillibrium point without POMO. As long as x amt / month is deployed, the market stays even. If more than that, then the market goes up, if less the market goes down.

Pretend your flying a plane, there's a certain amount of thrust needed to keep the plane level. If you pull back on the throttle (not the stick), the plane will descend in a glide, if you increase the throttle, there's normally more than enough thrust to enable the plane to ascend. Each month, there's a certain amount of thrust (POMO) that's being used. Keep in mind though, there's only so much thrust that can be used in the month.

Extra thrust can be used some days, or withheld on some days. But, in the end, it all has to even out. So, extra POMO can be used on some days to just keep the market even, or more to push the market up - or withheld to be aved and used on future days, in which case drag causes the market to go down. At this point, the FED uses the lack of POMO as a brake. Just like on most small planes, there is no real brake in the air / flight. Thrust, lack of thrust, and gravity / drag pretty much does the rest (fyi slips and other measures can be used, but not pertinent in this analogy).

Hope this helps! Sorry for the rambling. If you don't like it, I'll edit and remove after this weekend.

Good luck to all!

.

Thx! Would you also agree that the higher the price the more qe you would need. (you need more thrust once you pass a certain point)

[uempel]

Al_Dente, Todd Salmone over at schaeffersresearch has a good piece on Delta-hedging in his Monday Morning Outlook. I tend to disregard what's going on in the background when the market makes nice moves ...

[L_T]

Putting the above information together

Nice idea tsf--data mining, old school style. Go team humans!

CC1-1.pdf

Thanks to all who post TA here. (& thanks to Al_Dente for also allowing me to retire my weekend news feed )

Wow very nice summary and presentation!

[gappy]

Areas of support/resistance congestion fit a fib high/low profile ending ~spy 200, whether top down or bottom up. Be it a 4 hour chart...

Capture.PNG

....or a quarterly.

aa.PNG

glta Vote Cobra.

[DellGriffith]

Friday was a semi-rare event. Daily SPY experienced a breach of the lower bollinger band.

Breaches of the lower band should be thrown out when they come very early in a correction.

Jan/29/14 (3 days into a correction), Jan/27/14 (5 days into a correction) and Aug/13/13 (2 days into a correction) all failed. However, a breach on June/24/13 (23 days into a correction) perfectly called the bottom. A breach on Nov/25/11 (20 days into a correction) perfectly called the bottom. A breach on Aug/8/11 (11 days into a correction) marked the end of a waterfall decline.

Friday's lower breach arrived only 6 days into the correction, which I would discard a worthless signal. It is too soon.

[Mr. BachNut]

.

.

what is your projection for the month of may and june ?

Kind of difficult to project at this point. The next Fed meeting is end of this month (April 29?). If they keep it at $30 billion for May, then I see the $SPX dropping about 80 points by end of May, to around 1710. Won't know exactly until they publish next month's schedule (end of this month also).

However, 2 big points -
(1) the ECB might institue their own QE at the end of the month. They said they are waiting until after Easter to see the results. If the ECB does institue QE, this will change the rules quite dramatically. The ECB would be buying US Bonds to devalue their own currency to help their exports. If the ECB institues QE, then all bets are off and all this will have to be re-evaluated. The ECB QE would more than make up for the Fed's Taper and markets could take off again.
(2) If the ECB does not do their own QE, then I'm not sure the Fed will / can Taper again. It kind of depends on where they want the market to be. This is an important election year. Yellen will need to plot the course carefully leading up to the elections. However, if the Fed does Taper to $25 billion and no ECB QE, then I would expect the $SPX to be down 130 points to around 1660 at the end of May.

So, two things to watch for (1) ECB news on QE (2) the Fed POMO schedule released at the end of the month

.

Agree. I would add a third consideration. Corrections build up cash that can come back into (or just stay out of) the market, and they can change the amount of leverage in the market. (Some of the timers here may remember the late Terry Laundry's T Theory Cash Build-up phases.)

If the market has been more or less fully invested for awhile (which I think it has), POMO has been the cash flow at the margin that has moved price. It has been the dominantly weighted variable if you will.
To the degree the changing POMO dynamic or other aspects of Fed policy or even exogenous events change belief structures in the market (Psychology), we could see important shifts in general portfolio allocations as well as levels of leverage (margin credit, repo, carry trading). So, while the market may continue to correlate well to the Fed balance sheet, we may see the variability of the flight path (to continue with that analogy) widen (perhaps considerably) the further we get away from Flumanchu's net tapering moment a few weeks ago.

Some of the more intense short moves on Fed news recently seemed to have had less to do with comments about POMO and more to do with guidance about when interest rates might normalize, which has significant implications for carry trades.
It was telling to see the damage control pursued in the wake of Janet's 6 month Q&A remark. The Fed is pretty trapped.
I think people have to be cognizant of the fact that the market is pretty extended right now (low cash, high leverage). As long as it stays that way, POMO flow can account for/explain much of the change in SPX (perhaps even more so in the hot money NASDAQ/R2K). On the other hand, a shift in market structure could cause other variables to outweigh POMO, perhaps by a little or by a lot. Everything is fine for now; so I don't want to sound alarmist, but to make a blatant hyperbole, it may be that the Fed has to make an instrument landing in dense fog to a short runway in a canyon with heat seeking missiles pointed at it. I hope everything turns out OK but expect we'll experience at least some turbulence along the way. I think European QE could make their job easier.?.?

[Mr. BachNut]

Putting the above information together

Nice idea tsf--data mining, old school style. Go team humans!

CC1-1.pdf

Thanks to all who post TA here. (& thanks to Al_Dente for also allowing me to retire my weekend news feed )

Wow very nice summary and presentation!

Hey. That's cool. Thank you.

[flrtrader]

Morning Sir

first as others I would like to thank you for the effort and kindness of sharing your work. I wanted to share a post I read that eludes to the pomo actually being more than advertised. For your review. Also if true does this change your outcome?


http://investorshub.advfn.com/boards/re ... =100456531

Best

flrtrader

.
WARNING --> Some people may construe this post as Conspiracy Related and might be offended. If so, sorry about that.

Here's POMO Projection for the next week:

Day date = = = = = = PROJECTION = = = = = = High Proj
Fri 4/11 = = = = = = 1818 = = = = = = 1848
Mon 4/14 = = = = = = 1822 = = = = = = 1852
Tue 4/15 = = = = = = 1814 = = = = = = 1844
Wed 4/16 = = = = = = 1816 = = = = = = 1846
Thu 4/17 = = = = = = 1809 = = = = = = 1839
Fri Good Friday = = = = = = 1809 = = = = = = 1839
Mon 4/21 = = = = = = 1791 = = = = = = 1821

Note - The High Proj is simply 30 points more than the Projected amount. Typically, the market doesn't get more than 30 points more than the Projected amount. If the market is closer to the High Proj amt, then funds are being borrowed from the future POMO amounts which will eventually cause a greater reaction.
Markets are closed on Friday and NO POMO from Thur 4/17 until Tue (4/21) - meaning the market will want to descend down toward 1791 in this timeframe. They might try to do this as part of OPEX.

April End of Month Projection is 1792.

Observation - This is just something I've noticed - I guess it's all about momentum:
----> If the market closes at a HIGH on OPEX day, the market normally continues higher for at least the next couple of weeks.
----> If the market closes at a LOW on OPEX day, the market normally continues lower for at least the next couple of weeks.

ok - what about the whole Fed Conspiracy stuff.
Here's the deal - I have the utmost respect for the FED. As I've said before, a Strong Market means a Strong USA. If the FED had not acted, the USA would have been vulnerable for some type of action.
So, saying that, I believe in the FED, and the power they have. There's a reason they say 'Don't fight the FED'.

So, how does this relate to POMO? The Fed has been deploying all kinds of extreme measures to help the economy. Through all the interest rate cuts, etc. the market still needed more money in order to come out of the abyss. That's where POMO comes in.

The example is that the Fed is piloting the market - just like flying a plane (btw I got my Private Pilot License back in 2000 and so there's the reason for the analogy). All the Fed has done (except POMO) was not enough to move the market up - just not enough thrust, there's still too much drag. By using POMO, the market has additional thrust. However, with so much drag, it takes a lot of thrust (x amt of POMO) just to keep the plane in level flight (market even). If more than x is used, then the market advances. If less than x, then the market declines.

So, the market naturally wants to go down to some equillibrium point without POMO. As long as x amt / month is deployed, the market stays even. If more than that, then the market goes up, if less the market goes down.

Pretend your flying a plane, there's a certain amount of thrust needed to keep the plane level. If you pull back on the throttle (not the stick), the plane will descend in a glide, if you increase the throttle, there's normally more than enough thrust to enable the plane to ascend. Each month, there's a certain amount of thrust (POMO) that's being used. Keep in mind though, there's only so much thrust that can be used in the month.

Extra thrust can be used some days, or withheld on some days. But, in the end, it all has to even out. So, extra POMO can be used on some days to just keep the market even, or more to push the market up - or withheld to be aved and used on future days, in which case drag causes the market to go down. At this point, the FED uses the lack of POMO as a brake. Just like on most small planes, there is no real brake in the air / flight. Thrust, lack of thrust, and gravity / drag pretty much does the rest (fyi slips and other measures can be used, but not pertinent in this analogy).

Hope this helps! Sorry for the rambling. If you don't like it, I'll edit and remove after this weekend.

Good luck to all!

.

[Mr. BachNut]

I don't know about you guys, but my scan of the blogosphere this weekend is turning up a really nice dispersion of views (both bullish and bearish) on where the market goes in the coming days. Consensus is weak.
As usual, I don't have a clue. However, I'll interpret the above to mean that the Friday closing levels have technical significance.

[Mr. BachNut]

I confirmed a cycle top as of April 1 on my NYMO chart Friday as NYMO made a closing lower low below the recent trading range.
Index price also reached my 1st target area (red circle), which may offer some support early next week.
Next target area is a nice conjunction of the October high, my lower Keltner band and the 200 day MA.

Perhaps in agreement with the lack of consensus I noted in my prior post, this analysis suggests that it is an open question where we go next.
As NYMO did not top overbought, I am inclined to think it is less likely to bottom oversold.
In addition, Friday's low NYMO has some symmetry in terms of distance below the recent range compared to the recent high being above the range. (This is not a technically sound concept but it is appealing to me intuitively at the moment.)

Should we bottom here or make a token lower low early next week, I guess I would question the durability and degree of any rally. It could be good, just has a lower probability of turning out good.
Weak lows in April and December 2013 preceded new highs, but price never fell below the middle Keltner band in those cases.
On the other hand, if some additional selling gets NYMO to an oversold level and price approaches (if not hits) my 2nd target area,
I might start dreaming about a trip back up to the upper Keltner band, or even higher as we could get a double bottom chart pattern with the February low.
Mr. Market will do what he wants as usual. He has been quite mischievous lately. Let's see what happens.

[fehro]

Interesting read.

Jeff’s view is that, while markets seem to be big fans of Fed policy, the large problems surrounding healthcare costs, social security liabilities and the demographic cliff (fewer workers, higher percentage of the population relying on the entitlement system) have not even been touched. He also believes the exit from QE is probably not a foregone conclusion, he is very skeptical of what he refers to as a “circular financing scheme.”

http://www.thereformedbroker.com/2014/0 ... ring-2014/

Interesting chart from above link... High end Retail vs Low end Retail... since QE

[BullBear52x]

Not much to say but expecting more down to come.

for a die-hard counter trend or bottom fishers, I got this to say:

[gappy]

a.PNG

b.PNG

c.PNG

[DellGriffith]

Ok hide the women and children because its scary chart time.

A series of 3 images of the monthly SPY. Focus on the MACD. In the first two, we see the MACD break uptrend lines (as shown in the bottom panel) and it led to major selloffs of massive volume (follow the vertical blue line up to the major red volume spike and the selloff in SPY). The third chart shows we are verging on breaking another MACD uptrend line. So does this warn another major selloff is imminent?

The first one is the May 2010 selloff. The second is the July/August 2011 selloff.