Ratios to Reason

There is evidence of new trends emerging in the market.

US bonds look ready to head lower relative to their foreign counterparts. Will another cycle of credit shock prevent this trend?

Although the SPX indicator remains bullish, the NASDAQ is now bearish for the first time since the end of November. This implies an environment of increased volatility with a lower percentage of stocks trading above their 50dma.

The spread between the SPX buy write and its underlying is currently bearish because it is rising. Moreover, the 10sma is beginning to flatten, so a break of recent resistance would be even more bearish.

The Yen is rising against the USD and that doesn't bode well for equities. Perhaps it will retest the recent highs before the BOJ acts again.

Treasuries are technically in a downtrend relative to gold, and that puts the dollar in jeopardy. Perhaps another round of credit crisis will bring money back to the ol' U.S. of A.

The market looks poised to break lower, but there isn't enough cause for alarm to run to the exits yet. Increasing volatility is certainly a bearish symptom, and considering the massive run up since the November lows, a move lower is quite reasonable. The numbers being released Friday are utterly meaningless, but the reaction will be critical.

On a side note, it's good to be back online with a working computer. Although the imbeciles at Office Depot raped my face and charged 100+ clams for an AC power adapter, I will have the last laugh; their awesome 14 day return policy is effectively a free rental. Now that I've bought another on Buy.com for 29.99, maybe I'll swallow the power chord and floss my intestinal tract before returning this P.O.S. adapter to the Office Despots.

Tuesday's Tidbits

Hooray, an up day! Here are some things to consider.

My bullish SPX indicator lives to see another day, perhaps it'll make a new X by the week's end.

FINALLY, the BXM/SPX spread is heading lower, and that is a sign of more aggressive risk taking which is good for equities. Due to the overbought condition, a gap open tomorrow in the SPX should be faded if this chart can't get below the 10sma.

The equity/bond spread has stabilized over the last month, but I suspect we're in for a breakout to the upper Bollinger.

Hrmmm, this is tricky. The Yen might be worth getting back into, but that doesn't jive with my reflation scenario. USD/YEN is a must watch because of the chart below.

Japan has broken its massive downtrend, and looks capable of hitting the upper Bollinger. If the Japanese market is rising with a strengthening Yen, I think I'll go invest in Japan to take advantage of the equity and forex trends.

Jibbidy jabbber jab, I don't want to repeat myself tonight. I could talk this shit all day, but it's pointless when I have better things to write. We're still going up, but don't bet the farm, because the decreasing volatility is still high and can make you loose your shit faster than a hooker with rubber sheets.

Rendering Ratios

One final chart post for the weekend.

My NASDAQ indicator keeps printing X's signaling lower volatility and more bullish stocks.

The intervention I was looking for here is underway. Don't fight the BOJ until you see another X printed.

Gold and precious metals like silver continue to put in nice uptrend work. This remains the best sector for any long bets.

More NASDAQ stocks are trading above their 50dma on lower volatility, another bullish sign.

The only thing holding back the inflation trade is the strength of long term Treasuries.

Nothing too crazy in this mix, but I like to keep track of EVERYTHING. Sometimes it feels like busy work, but you never know where future insight will lie. Next up, getting my X-mas wish list ready.

Ratios and Such

It has been a wild week thus far, here are some internals.

Banks are back into a bullish position, goddamn whiplash got me.

There was a new X made in my primary market indicator, which is a great sign for equities. Risks are still high, but if the dollar continues to fall, this should continue to rise.

Transports have yet to turn around, and that is holding the market back.

All eyes on the BOJ. Now it is their turn to print money at our governments behest in the interest of maintaining "global economic stability." God bless America, otherwise we'll nuke you.

The NASDAQ summation index is still rising, so I'm staying long anything except the USD.

We're coming into the final options expiration of the year, and it sure is getting hairy out there. The dollar is the most important variable, and it's fate rests upon the willingness of foreign central banks to play our game. I'm fairly confident that the US will emerge from this looming crisis, but I'm holding shiny yellow stuff so I can sleep at night. I still can't get my head around the move in Treasuries, but who cares when equities are moving up?

Monday Mutterings

I hope to God that the chart below is a misprint and not a premonition.

If bonds make a move like that, this crisis is going to take a turn for the worst.

Though we closed positive Friday, my indicator fell, suggesting a bearish divergence in an uptrend. Buy on the dip is still in play, but sell on the rip may soon be in order.

The spread between US Equity and Bonds is battling with resistance. A resumption of the downtrend is likely, but has yet to be confirmed.

Yen versus USD continues to be a winning trade.

Priced in gold, the 30Y Treasury has pulled into support. Until this trend breaks lower, inflation plays will move lower or sideways.

This market is giving lots of mixed messages. I'm expecting range bound trading if volume is low, and a volatile break down if shares start to move. This means I'm most unprepared for high volume accumulation and mark up, so I will be watching for such action like a hawk.

On another note, I'm starting a computer service company in Seattle, so if anyone has arcane suggestions, please feel free to leave a note.

Tale Of The Tape

This market continues to exhibit an upward bias, so keep buying the dip. Risks remain high.

The markets haven't looked this bullish and stable since Obama was elected.

The spread between Buywrite and Buy 'N' Hold indexes made a new low and violated the lower Bollinger Band, signaling a potential trend change.

The falling spread between US Equity and Bonds indicates an increasing appetite for risk.

The Yen vs the Dollar continues to look strong. Though it is a bearish trades, it hasn't suffered in the recent rally.

The McClellan Oscillator is overbought by recent historical measures, but we're in unprecedented times.

Shorting this market is suicidal for all but the quickest. Ride the wave up, but know that it will come back down. I'm interested in accumulating breakout stocks on pullbacks, so I'm not bottom fishing. I will hedge by getting long SKF or buying Yen.

Fuck the Fucking Fuckers

My Internet was down all day, no trading, no shorting, nothing. I swear there is a conspiracy afoot to prevent me from trading on these awesome days. I missed the Geithner rally a few weeks back under the same circumstances.

Anyhow, the markets look ready to churn lower now that volume has come back in. The bulls have one more day to prove themselves, otherwise this market is going down faster than a 5 dollar whore.

SKF is my favorite, and I wouldn't be surprised to see it at 300 in a few days if the bears maintain control tomorrow. Capital preservation and keen risk management remain the name of the game. TLT, FXY and UUP are still the strongest trades, and have the greatest psychological aversion amongst small investors. Nevertheless, GLD is pulling into potential support, so look for range bound trading, or the resumption of a new downtrend.

UUP & $USD Divergence?

Any one have thoughts on the following divergence?

The relatively new Dollar Bullish ETF UUP is indicating a new downtrend.

On the other hand, the $USD, a index with a bit more trading history, seems to be at the lower range of an uptrend.

Since they share a 1:1 correlation, this aberration might be explained by the graphing technique I'm employing. The charts are scaled by average true range over some really long period I've arbitrarily set (9999999). Since UUP has little trading history and less long term volatility, it might exhibiting a closer relationship to its relative trend line. Due to its longer indexical history, $USD has a greater range, and thus the scale is probably reflecting it's volatility. I suspect that many traders will be getting short UUP due to the chart, but perhaps it would be better to investigate the nature of the underlying $USD.

To put this into perspective, let me detail my past Thanksgiving. After a glorious feast centered around a enormous Turducken, I went out for a smoke with a few friends. A curious looking fellow who was clearly unemployed and missing a few screws came up to us and began a classic rant. "9/11 was an inside job, Planet X is coming, 2012, New World," yadda yadda. Since I believe all that shit, it was embarrassing to hear it from a clearly deranged lowlife for whom I have little sympathy. The nail in the coffin was his insistence upon an economic collapse, and the fall of the dollar, which is more conspiratorial logic that I agree with. Then it hit me.

When the unemployed and homeless are shorting the dollar, beware. All logic screams that the dollar should fall. We've all seen the charts, we know the debt burden is incalculable, we know that the Fed can print money. But the dollar is rising. Scores of analysts with enough degrees to melt the steel core of the WTC say that the dollar must fall. It isn't. Trade what you see, not what you believe.