Party Could Be Over - At a Minimum All Cash the Prudent Move

went long UUP yesterday at 21.62.  a little taste.

yo you guys want to make some bigbucks put some Moeny on DNDN and some on ford call me in january and tell me what your dooing with all the money i just made ya

DNDN - I will pass on this one BigBill.  best of luck to you.  looks like a call option on the firm's survival more so than a piece of equity.  i know it is a play on prostate cancer but i could care less about the stories behind it the chart tells me everything.  this thing got absolutely destroyed with distribution in early August.  then after "the boys" sucked in more new longs it just got whacked again big time about a week ago.  doesn't fit my system to hope for big news as this stock is very significantly damaged.  absent a completed hail mary pass news event that i have absolutely no capability to project will or will not happen, this stock will either drift up to a declining 50 DMA or move significantly lower on a percentage basis.  going long now to try and get a move up to the 50 DMA or other key levels (honestly not willing to calculate all of them) versus the potential downside does not present a favorable risk/reward scenario for me.   

Ford - chart isn't terrible but very far from optimal.  I'll pass.  rather have any capital potentially deployed to Ford sit in cash or pursue something else long or short. 

i understand this is a gambling website but i only invest/speculate based on setups and relentless analysis that create the highest probability of success with the lowest amount of risk.  yup it's boring and can be very boring at times. 

Also - many, many years of research already conducted by other sources has proven that 75% of equities follow the overall direction of the equity market.  so, if (and I know it seems impossible to the cheerleaders) stocks were to actually resume the downtrend then in theory 75% or more of all stocks would trade lower as well.  going long any stock with the market in a correction/downtrend leaves the investor with only a 25% chance of success before they even open up the starting gate.  the inverse is true when the market is in a confirmed rally. 

ok boys, the charts tell me we should trade down to my 1040 target and below in the near future.  i emphasize should because everything I am seeing is also being noticed by the boys at the Fed, Treasury, and ECB among other places meaning just as new lows should be imminent so can we expect additional bullshit, bogus announcements about new intervention and manipulation gimmicks.  or (as i feel Bernanke will keep to his pledge of Twist only and no balance sheet expansion until June of 2012) the Fed can tease the coke heads with mere rumors of QE3 by setting down the lines of coke on the table without actually letting the junkies snort them.  anyways, the intervention and manipulation risks are risks I can't control in the short run as stated previously.

this rally off the 1074 low for the year (funny how the hype machine and "europe is fixed" news went into overdrive as the market was about to break my 1040 level) helped form a "bearish megaphone" pattern which should set up for a new yearly low.  the spider attempted to break above the 200 DMA three times and no enthusiastic volume showed up to support it.  since then we have had 5 distribution days in November alone.  the highest volume day of the rally was the top as well suggesting "stealth distribution" even though technically that was an accumulation day.  market is in a confirmed correction and with a few bounces along the way should head lower breaking the 1074 and down into the 1000-1040 range in the short term (or lower).   

things I noticed about the recent "rally":

- low volume
- NO new leadership stocks emerged
- leading stocks that did break out struggled to move forward and most if not all of them were knocked back down into their bases rather quickly
- best performers were turds in a dead cat bounce
- the bases formed were a bit iffy in many cases
- rally moved in lock step with the euro and Dax rising at a very high correlation with little volume telling me algo driven and not supported heavily by institutions
- did I mention low volume

In addition to the distribution a few other things stand out:

- AAPL, AMZN, XLF (there she goes again getting down on her knees), and many others not acting well
- Dax pulling back and looks to be resuming the downtrend, same for the Shanghai
- USD looks to me to be possibly sitting on a launching pad.  yeah, yeah yeah the dollar is going to zero according to the cheerleaders.  maybe at some point but it's all relative in FX land.  if the USD breaks out higher stocks and commods will struggle

oh yeah all of the blowups in Europe which I have mentioned several times already (the CDS and yields sent a major signal all the way back in February) look like they might be important after all.  So this EFSF is going to save the day?  hmmmm, then why did it fly away from the German 10 yr immediately when it started to float on the market?

Nice write-up Atlas!

After all of that, which I have no clue what half of that means.

I'll pass on the equities and go with the bonds @1.9% per month and wait for another day to jump back in, perhaps? I'm months away from retirement and don't need another 2008.

everyone has their own goals.

I am NOT long any equities right now.  this thread discusses my main account(s) that are intermediate to long term oriented.  in my trading bankroll I am also NOT long any equities.  i don't swing against a 75% probability of failure backed up by tons of data.

I am long SDS and UUP.  both are exchange traded funds (ETFs).  SDS moves inversely to the spider (S&P 500) and UUP is essentially going long the US$ versus a basket of other currencies.  I am also very heavy long cash.  yup, good old boring cash.  I think (know actually) that "dollar cost averaging" and "buy and hold" are both garbage strategies.  cash can be an outstanding position or even the best possible position.   

the rest of my message refers to various things I have discussed in the past along with a little update on where I see us right now.

crazy stuff fellas, huh?

Well as I stated in post #30 above JUST AS the charts are telling me a sharp decline is imminent, the politicians and central bankers would kick into overdrive with the hope, hype, fluff, bullshit, and nonsense Kool-Aid parade around Main Street in "Everything is Fine" Happytown, U.S.A.  Following the Thanksgiving week the skank person in the media got the word to pump up some new and even more ridiculous than previously seen rumors.  The kicker though was the Fed and China linking up.

The day before the Fed's move with the price it charges to send it through the windows of its swaps lines we have China announcing a drop in its required reserve ratio.  The cheerleaders of course loved this move ("yipppeee, more free money and crack cocaine for China to hand out on loans that will end up in default") but maybe you should wonder why they felt the need to ease financial conditions.  After all the Shanghai is not only at a new annual low but also below the 2010 lows.  I suppose Bernanke does not yet have a way to manipulate chinese stocks. 

The next day (again back in the week after Turkey Day) the Fed felt compelled to make an announcement about actions it is taking in concert with the main Central Banks across the globe.  In the statement the Fed said that in the event financial institutions would come under very high levels of stress, then the Fed will loan dollars to them via its swap lines at a rate 0.50% lower than before.  Hmmmm, I wonder why they would announce this.  The translation is that AT LEAST one major bank was on the brink of collapse and they had to throw the market a bone which helped for like a day or two (those same stress factors are showing up again).  Yet again, the drunk on Kool Aid crowd loved it and equities soared.

I also mentioned "laying the coke down on the table without actually letting them snort it".  Prior to today we got just that with lots of happy talk about QE3 and then today the Bernanke squashed the QE3 induced coke high.  So, not sure what else they will come up with in the short run to dangle out in front of the junkies to make them continue to chase, but I'm sure they won't let this implode without a fight.  1.33 on the EURUSD was a battle line and that went and now 1.31 EURUSD is a battle line.  Also the Dax of course.  The playbook is to prop up the EUR and Dax which thus makes the ES get a hard on every morning. 

Anyways, so where the hell are we at now?  Couple things I see with this bounce off the intermediate wave low made during Thanksgiving week:

- almost back to levels in the major averages of the night prior to the Fed announcement on dropping the rate it charges to borrow USD through the swap lines
- 3 distribution days in the last 5 trading days with some of the averages
- dollar on the verge of breaking out starting a potential big move off of the launching pad I referred to 
- we NEVER got a follow through day and "Day 1 of a Rally Attempt" was quite dubious.  "Day 1 of a Rally Attempt" technically occurred that Monday after Thanksgiving.  The averages did rise above 1.5% on volume sharply higher than the prior session but that prior session was a short trading day the Friday after Thanksgiving.  Flimsy.
- no leaders breaking out
- the "Follow Through Day" needs to occur on day 4-12 of the attempted rally and preferably during days 4-7.  We have passed that.  Tomorrow is Day 12.

Now this really stood out to me when I analyzed it.  Over 80% of the move up in this bounce occurred during the overnight session and not during what we call the cash market for ES.  So it has been a "ramp it and camp it" move where they jack the futures up in the morning typically in response to some bullshit story but the market doesn't move much at all higher than where it opens.  "Ramp it and camp it". 

We shall see where it goes short term.  Lot of people willing to chase a move higher this time of year but we are still seeing lower highs and lower lows.  Cray, crazy times. 

Couple of other things of note guys:

- U.S. Treasuries (yeah I know real exciting stuff haha) continue to see "off the charts" demand in auctions and yields moving even lower in the last few sessions.  Gotta wake up your antenna if that many big players want to park cash in exchange for almost no return
- several of the "key names" such as AAPL, AMZN, GS, XLF, FCX, and some others either literally sitting on the edge on the charts or breaking down.  AMZN for example may be breaking down fairly significantly and 120 could be in the cards.  AAPL is literally hugging that 200 DMA.  it might not plunge but if it doesn't pop higher it is tough for the Naz to move significantly higher
- risk assets or what many consider to be proxies for risk such as gold and silver kinda grudgingly not willing to break out to new highs and possibly rolling over
- the "bearish megaphone" i mentioned previously is still intact the market is bouncing around within it

Back in the summer/fall when the optimism for QE3 was sky high I mentioned that politically Bernanke is in a box.  With the employment figures not really improving but not really getting worse (yes I know the data is manipulated) and the Spider above 1200 what argument does Bernanke really have for QE3?  Awful tough for an incumbent to get re-elected with oil above $150 a few weeks after a QE3 announcement.  It may very well be that QE3 will only come after serious asset deflation (i.e. the Spider below 1000) when the very same politicians blasting Bernanke now end up begging for more help from the Fed.  I'm not taking sides I'm just sayin'. 

Good stuff atlas

i've been drinking the cash koolaid for about a month now. Some of the weirdest stuff was seeing negative money flows on block trades during some of those "rallies." Especially the selling of the apples, mcd's, and coke's. Tried to get into an inverse S&P ETF on the TSX but the volume's still too low and I couldnt get a good price. Oh well. Cash is treating me just fine.

wsc

Platypus - No, I am not a perma-Bear.  I deal with the situation at hand which can change.  #1 for me is the charts, TA, and all of the hard core numbers stuff.  Charts show you a mathematical and geometric picture of supply and demand.  Secondary to that is the fundamentals.

believe me, as an American and human being for that matter I wish we did not face these issues but the reality is that the debt issues facing the world are simply out of control.  Over time it is either 1) the destruction of debts and assets or 2) hyperinflation and monetizing which will likely cause armed conflicts.

I could see this move (if it were to happen) out of that megaphone go down to the 1000-1040 area.  Depending on some things between now and then maybe 960 or even 850.  Now, with or without a QE3 announcement from whatever that low is I would expect a rally - actually a pretty big rally.  Maybe up to the 1150-1200 area.  From there the epic plunge to 600 or lower.  This is all putting a gun to my head and projecting right now as things can change.

It will be interesting to see what Bernanke does.  Say what you want about him but he has stuck to the schedules he has publicly given the markets.  He did it with QE1 and QE2.  On the record right now he has stated he will run Operation Twist through June of 2012.  He would have to break his word to shift from that and move to QE3 prior to June.  Not saying he won't do it if under the gun just saying he has not done that yet.  

 

increased my position in SDS yesterday at 18.05.  in the late summer and fall i dumped some in the 26-28 area and bought some back (i know i know I didn't post that).  bottom line cost basis is now 19.23.  i have a long term top in the 1284-1311 box for the Spider.

same position in UUP.  long at 21.62. 

S&P just about flat since you first posted this.

We are about to experience one of the greatest bull runs over the next 10 year span. Not a straight up spike, but a nice gradual climb. Just watch.

well the good news is with dndn if you would of bought it wen i said you would have doubled your investment and ford you would be up $2 a share not bad

DNDN is a dog..nice bounce off that massive drop from over 50 last year, but seriously the company might not make it longer term..

The market will be up over 20% this year.  Heard this from a friend that works for Fisher.

Better than the 90's?  That will be tough.  But I do think we'll pass through previous highs.

Not sure what your point is.  I said I exited all long positions in 2/2011 with the Spider in the 1330's.  it did drop to the low 1100's and hit 1074 in the summer of 2011.  I had 1040 as my initial target but yet another stick save by Bernanke.   

Hey fellas I have not abandoned this thread but I have deliberately ignored it.  The reason why is that I didn't have much else to say.  I consistently stated in here the biggest threat to me is additional bailouts, intervention, and manipulation and how the markets may or may not react to them.  Well, obviously I am aware that there has always been intervention in the markets.  But, since November it has gotten beyond even the ridiculous levels it was at before November of 2011. 

The charts and my models suggested a high probability of a major breakdown in November of 2011.  Sure enough we had a few bailouts announced shortly after this.  The Fed agreed to bail out any European financial institution that was collapsing via the overnight FX swap lines.  The ECB conducted stealth QE to the tune of about 1.2 Trillion Euros, and LTROs essentially guaranteed successful sovereign debt auctions of paper with a maturity of three years or less (how will they sell 5, 7, and 10 year paper consistently without ECB support?). 

So, we got a bump on laughable volume and here we are again.  The charts are yet again suggesting a significant breakdown is coming.  But, this is a war and it is Bernanke, the ECB, Geithner, Merkel, and Obama versus the general population.  Their objective is to convince you that "everything is fine" and the tools they use to do so are in this order ES, EURUSD, and the Dax.  If they can keep these bloated pigs propped up they can use the media person to try and fool everyone.  The reality is that more than half of Europe is bankrupt and insolvent.  Over $600 Trillion in outstanding derivatives ensures that yes indeed it is all connected and troubles in Europe could bury numerous U.S. banks. 

So, it's kind of the same old same old story.  When will the next bailout be announced?  Is there anyone on the planet that would be surprised by another bailout?  If more money printing is announced will it cause risk assets to rise if it doesn't surprise anyone?  My system has been very, very, very good to me for about 12-15 years now but admittedly since November the intervention is pushing my approach to its extreme limitations. 

The dollar, gold, silver, and oil imply that the Fed will NOT expand its balance sheet anytime soon but stocks are high as a kite on QE heroin expectations.  The yield on the 10 year note is around 1.80% which is funny if it weren't so scary.  Why is it that low if the economy is so strong like CNBCheerleaders would have you believe?  Why isn't the S&P at a new all time high with Central Banks expanding their balance sheets by over $7 Trillion since 2008?  With all that assistance why isn't it at an all time high?

There is no market anymore unfortunately.  Stocks are simply a loser, disgusting junkie crawling along the side of the road begging their dealer for more free heroin and cocaine. 

In other threads I had made some comments about gold and silver.  Still waiting.  I didn't like the wide and loose erratic trading in their charts and they have been breaking down the last couple of months.  The GLD at 120ish might catch my attention and the SLV at 18ish. 

Classic example of "the boys" playing the public like a piano.  they had more inventory and they used the "news events" to unload that turd on everyone else.  if it breaks 7.00 should have a date with 5.00 and below real quick.  unless of course some unforeseen hail mary pass is completed.  just best to avoid these turds long or short in my view

Looks like Spain got a downgrade and that is why the markets dropped a bit.