Santa is gone?

Santa gave us a quick visit, which is pretty much 12/19 to 12/28 (early this morning on global ES basis). Not sure if Santa is totally gone or not. Personally I am not in trading mood this week. My scalping position was unloaded at the close of yesterday 12/27. My hourly ES chart actually thinks the top was in at 10:00 of 12/27 and calling this morning's high as bull trap.

Today's chart is another example of volatility, as we went from overbought to oversold in just couple hours this morning. The VIX is heading up. Is it usual? Well, I think it is not unusual recently. With a serious oversold condition and thin volume, this market has not much room to go down. My best guess is we are heading toward another bumpy trading range. We may see some higher highs, then collapse in new year. I don't believe 2012 is the end of human race, but it could be the end of some man-made so called civilization such as EURO or modern financial system.

HAPPY NEW YEAR!!!

Movie night

Rather than watching another sitcom, better take a look at this.
Here are some movie trailers from the 'trading category' productions, it's always nice to see it (if You know more, post it here too!)

Inside Job (I watched this one already and bot a BluRay for collection. Highly recommended.)

Too big to fall

Margin Call

Wall Street: Money never sleeps

What does Santa tell you

Last night, early this morning, futures reached 1249 as compare to Monday low at 1195 or a 4.5% rally in just 1 trading day plus the extended hours. Is it you Santa?

On the news, the long awaited LTRO is out.  LTRO, stands for long term refinance operation, is actually ECB print 645b Euro and lend to 523 banks in a 3 year term. In the market, the bulls are having problems lifting the market above the resistance levels, while the bears still feel “confused”.

Here is an interview with John Taylor, who is founder, chairman and CEO of FX Concepts, the world's largest currency hedge fund. It is a very good interview. I summarized a few points below:

1. LTRO is QE in another form in Europe
2. It is a short term solution to a long term problem
3. This is a solvency crisis, not a liquidity crisis. Printing will not work. (You give a broke guy a credit card instead of a job)
4. Germany is doing so well that wreck Euro and EU
5. Greece, Spain and Italy to leave EU or Euro zone. “We are losing at least one, that is Greece in 2012”.
6. Global recession ahead in 2012. US will get a mild one.
7. EURO will go to 1.12 and possibly 1:1 (now trading around 1.31, a 17% drop)

Real Estate in America is now a Good Investment | MARC FABER BLOG

Real Estate in America is now a Good Investment | MARC FABER BLOG

Where is Santa

The Fed didn't do anything. Following my plan, I stopped out on Tuesday. Not sure if it is right or wrong, but as I conservative investor, I think I should stand on the side or a moment.
I am using $VIX the volatility index as one of my major indicator. Usually it is inversely correlated with SPX, the broad market index. In my late November plan, I was trying to harvest VIX dry out. Unfortunately, in recent movement, both VIX and SPX were going lower together. Below is a chart posted by Cobra summarizing the recent occurrences of this situation. According to Cobra, the situation VIX down 0.8% while SPX also down happened 17 times in the past 2000 trading days (roughly 10 years).

http://www.cobrasmarketview.com/wp-content/uploads/1213_109B2/VIXDownOnSPXBigRed.png

I guess I am not very lucky on this one. At this moment I really really miss Santa.

What I did wrong is Gold. I should stop out earlier. I started to think of it couple weeks ago, but I didn't take action. Gartman is right. Gold very likely will under-perform equity for the next couple months. The reason could be the fall of EU and Euro will send US Dollar higher, while Gold as an alternative currency is priced in USD and will get a direct hit. US Equity is priced in USD too but the impact will not be that significant, since US economy will "stand-out" anyway on the fall of EU.
I see the slow down of selling activities in the market. I will find an exit.

Quick Update 12/13/11

I see top sign everywhere, every market. Ironically, with price fluctuating, VIX didn't move higher. I don't quite understand what it means. I don't think we have room to go down at this moment since FED is holding a meeting now and will make announcement tomorrow. Maybe, maybe Wall Street is just pushing Ben for it.
BUT, the volatility makes me uncomfortable. As a conservative investor, I am thinking of Risk-Off at this moment.

Here is the condition:
If FED failed to deliver (or hint), and SPX failed to take out recent high at 1265 by the close of Wednesday 12/14/11, I will exit Equity, and I will hold Gold for a little bit longer.

Life is good

Life is good. I get all I asked for.
I asked for a correction on 12/8. I got it! I asked for 1220.91 (based on ES which is the emini futures for SPX) and I got 1222.75 last night. What's next?

Dear Santa, I want to sell my long ES around Christmas for at least 1280s. I think the next couple weeks will be rough. I am expecting a choppy melt up to 1280-1310 area.

Something Interesting - 12/8/11

Here is Gartman's interview with cnbc. There are not too many people i trust in the market. Gartman is surely on the list. (He is very expensive. :( )




Here is the Colby letter:

The S&P 500 Composite (SPX: 1,261.01) absolute price rose to challenge the highs of the previous 2 trading days and its 200-day SMA on 12/7/11, only to reverse to the downside in the final minutes, again failing the test of resistance.

As I have been noting here, SPX appears to be encountering resistance near its 200-day SMA, now at 1264.00 and declining fractionally every day.

Because the 200-day SMA is so widely followed, predatory traders might try to plant more late-day false rumors, which appear to be mindlessly reported by the gullible media, in an effort to close SPX above its 200-day SMA, in order to trigger buy orders to sell into. Note that since 1/3/2000, of the 106 instances of the SPX closing above or below its 200-day SMA, 88% of the 200-day SMA crossover signals would have resulted in a loss, going both long and short, following the trend in the direction of the crossover.

Short-term price momentum oscillators have stalled out. Longer term, the 50-day SMA has remained bearishly below the 200-day SMA every day since 8/12/11.

Do you see what he is saying? Last time it was the FT rumor. Yesterday it was the NIKKEI. Yes, it is dirty. All things are ON. BUT, what are you expecting?

On Economy itself.
Here is a good summary of the EUR crisis by Reuter.
http://graphics.thomsonreuters.com/11/1 ... tings.html

More things I am reading. Here is  
"Why Gold Stocks Have Underperformed Gold"

A technical research report from a major broker

THE Underperformed BS stole my idea!!!!!!!!!!!

Still Bullish but Overbought

US Trading: The concerted action from central banks has been extending last weeks rally but with our short-term momentum indicators reaching overbought extremes as well as moving into initial price resistance the SPX is getting vulnerable for profit taking. Early this week we expect a test of the 200-day moving average at 1265 but given the increasingly overbought stance and the unsustainable momentum we wouldn’t be surprised to see a pullback later this week/next week towards 1220 before starting a final rally into deeper December.



The November 25th reaction low at 1158 remains a pivotal support as it represents a higher low versus the early October low. As long as the market trades above this level the short- to medium-term price structure remains constructive. On the upside we have a strong resistance area at 1292 (late October high) to 1304, which we still expect to be tested into deeper December. From a trading standpoint we maintain a bullish bias although at the end of the day we are talking about the last 3% on the upside before a meaningful setback starts into January. So all in all we would concentrate on selling into further strength instead of chasing the market. Into late January we expect at least a re-test of the late November low at 1158.

US Strategy: In our early October strategy call we said that from the October 4th low we expect the SPX to start a corrective (a-b-c) countertrend rally that should finally unfold in a volatile sideways trading range into deeper Q1 before resuming the underlying bear market into the second half 2012. The critical level for this call was and remains the October 4th low at 1074; as long as the SPX trades above this level we have no reason to change our underlying tactical strategy. Again, if we are correct then it is unlikely to see any bigger trend moves developing over the next few weeks, which means the market remains pretty much trading oriented and therefore a sell into any kind of stronger rallies.

Tom DeMark's interview on 12/5/2011

In the interview with bloomberg y'day 12/5, Tom Demark is calling for a rally to 1330-1340 with time stamp 12/21.


On 12/4 i made a blog post saying:

I will keep my longs thru the entire traditional Santa Rally. My perfect case scenario is:
a. correction to the end of this week (12/8)
b. next rally leg to the end of this year (12/28 or 12/29)

If you check the rally end date, we are only 3 trading days off. and the 3 days are actually around the Xmas holiday with expected irrelevant trading activities. Let's see how it goes.

As I disclosed I think myself a Demarkian. How do u like my way of showing respect to my teacher?

btw, Tom is also 2011 Technical Analyst of the Year
http://technicalanalyst.co.uk/conferences/Awards11.htm

Good job Tom.

LMP 12/2011 and quick read of market

Just a quick recap of Dec LMP status incase I didn’t mention it on 11/30.

The 5 IVY portfolio components are 

• SP 500 (Risk ON)
• MSCI EAFE (The Most Famous International Index) (Risk OFF)
• U.S. 10-Year Government Bonds (Risk ON)
• NAREIT (U.S. Real Estate Index) (Risk OFF)
• SP GSCI (Goldman Sachs Commodity Index) (Risk ON)

My current hold includes:
20% US equity (SPY), 40% mid-term bond (LTPZ), 20% gold (GLD),  20% money market (UUP)

My current approach uses only ETFs. I will think of Mutual Funds once things getting cool down.  In my practice, I went long on Gold via the gold ETF GLD to replace the Commodity component for now.

In current month's reading of the 6 components (5 original plus Gold), Bond and Gold are green, and the other 4 are red. In my last post, I summarized why I take Equity position despite the Moving Average signal is still negative. If you still remember, last month REIT actually turned green, but I overrode the signal, as disclosed here. This month it turned back to red. I didn't say too much about why, but I did spend some time on the topic. I may think of some specialized Real Estate investments, but not general term in the next couple months.

It is hard to tell what's going on next.  The Elliott Wave guys online are all turned bearish. Here are examples: 

1. Daneric, the author, is one of the first to rethink whether Wave 2 is over yet. 

2. ET was bullish but turned bearish just this week.

I agree we may see some pull back and I mentioned my 1220 target. Overall, I still think it may not be over yet. At least I cannot tell from the EUR/USD chart. This year the dip and the bounce are all because of Europe. If Euro is recovering, we still have some time to enjoy to the upside. 

add: Eur chart 

 

I will keep my longs thru the entire traditional Santa Rally. My perfect case scenario is:

a. correction to the end of this week (12/8)

b. next rally leg to the end of this year (12/28 or 12/29) 

Early episode:

Low Maintenance Portfolio - Nov 2011

Low-Maintenance-Portfolio-2
Low-Maintenance-Portfolio-1
“The Ivy Portfolio”.