03/22/2014 Weekend Update

[Cobra]

Smart money covered huge so the low might already be in!

The institutional buying and selling chart (courtesy of stocktiming) shows a little more accumulation. The chart doesn't tell future only confirms what happens now, so nothing special.

I see nothing on AAII and II. I'd like to see extremely extreme, for now both are far from extreme.

[Cobra]

Summary of the week's stock picks: viewtopic.php?f=10&t=1239&p=158028#p158028

[cletus]

[quote="Cobra"]Smart money covered huge so the low might already be in!



I interpret it to be bullish as long it is is below zero. If they cover and flip long, that's actually bearish. Note: All of the last bear market was above zero.

[Cobra]

preview of the next week's stock picks: viewtopic.php?f=10&t=1247&p=158032#p158032

[Al_Dente]

Don’t worry folks, Janet has it all under control.
ONE DAY after the bank stress-test results, the FED has already revised them.
I’m not joking. Here it is “REVISED 3/21/14” :
http://www.federalreserve.gov/newsevent ... 0321a1.pdf

Spoiler Alert: Revisions were minimal: “For 26 of the 30 firms, the correction led to either no change or at most a 0.1 percentage point change in the firms' minimum, post-stress tier 1 common capital ratios in the severely adverse scenario. The change led to a 0.3 percentage point increase at two firms, a 0.2 percentage point decrease at one firm, and a 0.5 percentage point decline at another.”
“The Federal Reserve will reissue a full result paper on Monday with corrections as they affect all capital ratios.”

As I am “severely adverse” to reading all the revisions, including Monday’s revisions of the revisions, I’ll just show you the “Pasta quickie” view in the table below. It’s close enough, especially as it is ALL “hypothetical” anyway.

OY, now the banks are pizzzed, and are weighing in with the results of their own internal “stress tests” including a few with Capital Ratios that are
MUCH higher than the FEDs guesstimates:
http://www.bloomberg.com/news/2014-03-2 ... youts.html

[nightlyhawk]

This is one of my short-term charts to show that a short-term top is in. So, be careful.

[Trade-a-holic]

nightlyhawk, can you tell me what indicator you use?

[rhight]

Cobra is an astute observer, but when he says that he doesn't see anything on the Investor's Intelligence Bull Bear ratio, I would encourage him to take another look

[Cobra]

Cobra is an astute observer, but when he says that he doesn't see anything on the Investor's Intelligence Bull Bear ratio, I would encourage him to take another look

Thanks.

[nightwolf]

AskSlim gave a really good presentation in ref. to the yield curve and the stock market. Based on this I think we still have a bull market with minor corrections until the short term rates start to rise and the yield curve flattens. Let me know your thoughts.

Here is the video (15 minutes)

https://www.tastytrade.com/tt/shows/market-correlations

[Al_Dente]

Einhorn is still short
Ichan is still long (the company’s largest shareholder)
Nearly 30% of the float is short.
Oversold: a little bounce is due anytime. But such massive short interest has been known to cause volatile squeezes before resuming the decline.
(every short sale is a buy order waiting to get triggered)
[edit: After HLF gave back >35% of its value in 2014, Argus (a “respected” research firm) yesterday downgraded its
rating on the shares to "hold" from "buy." ]

[rhight]

An update of the long term SPX Weekly chart ;

This week, price managed to move above the BB on Friday to make an intraday All Time High, but was not able to hold into the Close. It also stopped short of the 5 year rising resistance which stood at 1889 on 3/21, based on a linear extrapolation. (A line it touched exactly on 3/11 before reversing.) Coincidentally, there is an outstanding Positive Price Reversal on the SPX Daily RSI that calculates out to 1889. This may not be confirmed, given the 2 week negative divergence on the same RSI. A move below 1840 would negate this PPR. Also note that there were two Bear Setups on the Stochastic back in 2011 (I only drew 1 before). Today, we have one, and I will be interested to see if another one develops over the next few months.

It is not uncommon for reversals to take place over a 2 week period. But these QE fueled reversals have been dragging on for a month, it seems. I've put boxes around several that occurred near the upper part of the BB in the past few years. Next week will be the fourth of this consolidation, (we were at 1860 four weeks ago.) I should say, there have been consolidations that have turned into continuation patterns, and so the jury is still out on a reversal here.

The Daily Time Box for a reversal based on the overlap of the last 8 Hi to Hi cycles (avg +/- std dev) with the last 8 Lo to Hi cycles extends from 2/27 to 3/25 (next Tuesday). These are not iron clad, but does indicate that this swing is getting long in the tooth. When that is combined with the 60 min cycle red Time Box (see chart) which extends into 3/25, the time for an imminent reversal may be at hand.

There are a slew of negative divergences on the Daily Volume, Strength/Breadth, and Sentiment indicators to support this view. Still, you never know, and this could drag out for another week or two. The AI trading systems are all looking at similar data, and the time to take some profits ought to trigger soon. And so, a 5% pull back to the QE3 Express trendline in the area of 1790 would be consistent with this accelerated cyclical advance, but I will be looking with interest to see if that 22 month TL is finally broken this time, with subsequent horizontal support found at 1740 possibly setting up a large H&S like in 2011. That's getting ahead of the curve, but something to look for.

[nightlyhawk]

nightlyhawk, can you tell me what indicator you use?

Well, it's a Slope indicator within RSI settings. Some readers "complained" that my charts looked so complicated, which is why I only display a partial of it to please their eyes

[Al_Dente]

AMZN
“Cheap Words”
The New Yorker
http://www.newyorker.com/reporting/2014 ... ntPage=all

“A monopoly is dangerous ...”
Amazon declares itself to be “Earth’s most customer-centric company”.
“...Few customers realize that the results generated by Amazon’s search engine are partly determined by promotional fees... “
Publishers call it “bribes,” and they “… dread the annual negotiation of this payoff; one of them described it as ‘squeezing our nuts.’ “

“In 2004, he [Bezos] set up a lab in Silicon Valley that would build Amazon’s first piece of consumer hardware [Kindle]... Bezos told the executive running the project, ‘Proceed as if your goal is to put everyone selling physical books out of a job.’ “
“Amazon has successfully fostered the idea that a book is a thing of minimal value...It’s a widget.”

“In March, 2009, Slate criticized Amazon for its miserly philanthropy, especially in the Seattle arts world, saying that certain lemonade stands were more generous. [Someone at Amazon]...showed the article around, and the next day a printed copy came back to him, with “Fix This” scrawled across the page in Bezos’s hand, and a budget of roughly a million dollars attached. (Amazon denies this.)”

[jademann]

Been waiting for a 2 weeks for this setup:
0-3 days left...

http://stockcharts.com/h-sc/ui?s=$SPX&p ... 4100032247

I believe that this simple cross is reliable?

[Al_Dente]

On March 18 an investor paid almost $8 million for a trade that will pay off if the VIX rallies substantially by May.
“It was one of the largest VIX trades we’ve seen in a while and an interesting way to put on a tail-risk hedge...This is a play on the VIX shooting through its high not seen for the last couple of years.”
http://www.bloomberg.com/news/2014-03-1 ... cmpid=yhoo

Yesterday's chatter:
By picking the long call 22 strike vs the 20 strike, the cost of the trade was lowered, but it also requires more than the routine level of volatility to develop.
The VIX looks to have reached that level between 7 and 11 times since 1990, depending on how you count it.
The VIX Futures are in contango and the May VIX trades at $16.25, and April VIX trades at $15.70.
If nothing happens between now and expiration in May the $8 million will be lost.
http://seekingalpha.com/article/2102363 ... _3_4&ifp=0

[Al_Dente]

The Dow was up +237 points on the week
The ETF top-ten flow for the week (not including Friday) is below:
$1.1 billion dollars directly out of SPY
MOO outflow means the DBA took a bit of a rest; ditto GLD

VIG: The $2.5+ billion inflow into dividend-paying stocks is a defensive posture. I thought perhaps it reflected the anticipation that banks will increase dividends after the “all clear” stress test HOWEVER I don’t see any banks in its top holdings. VIG is commission free at Firstrade, TD Ameritrade, and Vanguard and has a 1.8% yield which varies depending on the price…
I use DVY which is commission free only at Fidelity (the point being that the more houses offering free commission, the more attention it will attract).
DVY has a 3.02% yield, and no banks in its top holdings.

Vanguard has seven of its funds in the top ten INFLOW and that is rare.
The near $4 billion inflow into Vanguard’s mid and small cap and growth funds dwarfs the $1 billion out of SPY
etc
Who cares? This is last week; it's old news already.
Often a trend can be spotted early in the flow data, and often such trend can continue.

[koolblue]

HERES THE HOURLY PICTURE:

[flumanchu]

It's all about the POMO!

This is kind of long, but hopefully all will benefit from it - please let me know you're thoughts. You might think this is nuts, but it's what I've observed.

Market Close on 3/11 - appr. 1865

Market Close on 3/18 - appr 1872

5 Trading Days between 3/11 - 3/18
--> POMO applied appr 10.25 billion
9 billion (avg of 1.8 billion / day) would have been required to keep the market even.
1.25 Billion more than the 9 billion (avg)
- 1.25 billion equates to about 10 points (just a guess at this point).
1872 is close enough for me.


I doubted POMO's effect for so long, but finally came to realize how much POMO is keeping the market up. The Fed even says this is what they want it to do. All of this is orchestrated, it's all by design. I think 2008 was a surprise for the Fed - they were not in control. Now, the Fed is just an extension of the Big Money and our Government. A Strong Market, means a Strong U.S.A. They will ensure they control all declines - it happens on their timetable.


So, what's next - Previous QE's were designed for the market to fall in the summer. This one is no different. Summertime blues will hit within the next 2 months.

This month is $35 billion POMO, with Taper next month it will be $30 Billion.
I think there's 21 trading days in April. 21 * $1.8 avg = $38 Billion needed to keep the market even. That leaves about $8 billion short for April. That would equate to about 80 $SPX points. So, Whereever April starts, it'll be 80 points lower at the end of April.

What about between now and end of March? Currently sitting at 1866 (3/22). Between now and end of March is 6 Trading Days, which would mean we need 10.8 Billion to hold it even (1.8 * 6 trading days). $11.75 Billion POMO will be applied between now and end of the month, which is appr. $1 billion more than is needed. This equates to about 10 spx points, or about 1876 for end of March.

Here's the POMO schedule with projected $SPX values (guesses):

Fri, Mar 21, 2014 Mon, Mar 24, 2014 Outright Treasury Coupon Purchases 02/15/2036 - 02/15/2044 $1.00 - $1.25 billion --> -6 -> 1860
Mon, Mar 24, 2014 Tue, Mar 25, 2014 Outright Treasury Coupon Purchases 11/15/2024 - 02/15/2031 $0.50 - $0.75 billion --> -10 -> 1850
Tue, Mar 25, 2014 Wed, Mar 26, 2014 Outright Treasury Coupon Purchases 02/15/2036 - 02/15/2044 $1.00 - $1.25 billion -> -6 -> 1844
Wed, Mar 26, 2014 Thu, Mar 27, 2014 Outright Treasury Coupon Purchases 05/15/2021 - 02/15/2024 $2.25 - $2.75 billion -> +10 -> 1854
Thu, Mar 27, 2014 Fri, Mar 28, 2014 Outright Treasury Coupon Purchases 12/31/2018 - 11/30/2019 $3.75 - $4.50 billion --> +28 -> 1882
Fri, Mar 28, 2014 Mon, Mar 31, 2014 Outright Treasury Coupon Purchases 02/15/2036 - 02/15/2044 $1.00 - $1.25 billion -> -6 -> 1876

So, Prediction is $SPX ends at 1876 for March, and ends at 1790 for end of April.
Note: POMO may not be applied on a particular day, but instead held to be used another day, or borrowed from a future day - depending on what the Fed wants done. However, when it's all avg'd out, it ends up working out over a few days or week at a time.

Hope this helps!

.

[nightlyhawk]

Just a simple WEEKLY market sentiment chart. Enjoy the rest of this weekend everyone