I thought I'd share with you guys what seems to be the next leg lower in stocks. Check out the TLT (20yr US Treasury Note ETF). It's been crafting a massive descending triangle pattern in the last year. The last 4 Treasury auctions have been a disaster and demand is beginning to wane for US debt.
The TLT is down another 1% today and approaching a significant psychological long-term support level. It quite possibly could get busted in the next few days or weeks. This will likely make headlines in the financial mainstream as lower bond/note prices mean higher long-term yields. That, in turn, will stifle an already tepid economic recovery and send asset prices tumbling lower.
On a technical note, the SP-500 has rallied to its trendline resistance today. Given the clues coming from the bond-market and the overbought condition of stocks, getting short stocks looks like good risk-reward at this juncture.
I would be a seller of all stocks right now and a short-seller of vulnerable industries like US REITs and US retail names or ETFs.
You got to remember though that the big playes do not play for here and now. They play 6,12, 18 months out as they are like an aircraft carrier and can't turn on a dime. So if the real estate market and emplyment rate in March is good, shorting is not the way to go in my opinion as the overall "sentiment" in the market will be up. Did you notice Abby Cohen's prediction of 1350 in the S&P? I'm keeping an eye in the movement of the dollar and commodities very closely as well as China's not buying any more US debt at the momment. Not clear to me yet how and to what degree in is going the affect the market as well. Having said that, as I said before, take what the market give you, short or long...and don't be a pig.
Forget about the next unemployment report being a game changer, unemployment will not change overnight...even if the numbers say so.
The real estate market is not what they are making it to be. Furthermore, it takes months, perhaps years for that domino effect to play out, it won't happen overnight either.
Not making any predictions on the direction of the markets, just doubting you reasoning.
I've been watching the USD and Euro closely and it appears that the USD is still in correction mode here. Based on the last correction, it would be another 1-2 weeks before we see next leg up with USD. Until then I think the Dow/SP500 has room to run yet. I predict that tomorrow the Dow will have a bigger gain with a bigger drop in USD.
I'll do some more research with numbers tonight.
I've been trying to make something of the US dollar charts. I find it not possible to be positive about anything in the nearterm.
I was expecting the US dolla index to top at 80 and pullback to 76, that did not happen, So now it's wait and see as far as I'm concerned.
The stock market held ground well today... closing in the the resistance at the low 1100 SNP. If the SNP can break resistance we could well se a retest of the highs from the fist week of January, possible setting up a double top.
I'll be watching closly for a break above 1105 close on SNP500. If that happens I'll lighten up on my ultrashort.
Phil, I'm alawys amazed you ST traders have so much to say about a compressed time frame lol.
That aside, I agree on quite bit in this post.
Retail and anything related to a flush consumer, I agree are to be avoided....in spite of easy money that IMO will continue for an extended period of time ...because of the employment backdrop.
I just don't see US consumers regaining confidence or having the capacity to spend like in the recent past.
But I disagree with being short the whole market.
To the extent we continue to have easy money, my bet is it continues to pile into 'things' but not residential or commercial RE! and certainly not into economically based activities....atleast in the US....cause the banks aren't cooperating.
But currency (and USD's ) outside the US will behave differently.....hence my thinking....
So equities based on economically based activities outside the OECD I think are OK as are many commodity based equities.
I also like gold as priced in most OECD currencies (or as measured by the dollar index-do they do that?) but not so much in $A, $C.. and even less in yuan and reals.
To me it's the accumulating excess printing over and above the real GDP growth in most OECD countries that will undermine their currencies whereas the EM's are justified in printing more simply because their economies are growing much faster in real terms.. so should be good for gold.
And the potential demand or gold could be unprecendented because we are talking about major currencies being debased right now, i.e. USD, Euro, yen and pound.
And I would agree with you that shorting UST's will be a very good bet at some point but I think it might be too early for that now.
The Fed is buying newly issued and maturing bonds with both hands and I'm just not willing to bet that that stops this early in the game.
What choice do they have given fiscal policy?
So my strategy would be to wait on shorting bonds and instead capitalize on where the extra liquidity will go.
Here's some info on what Buffet, Soros, Icahn, Paulson, and Ackman have been up to.
PBR, Hess and Gold mentioned FWIW.
Phil, I agree with you analysis .......... somewhat. The TLT is nearing support and could see a bounce. Also, dollar strength has been extraordinary since early December and does look to be stopping that trend until euro reaches somewhere around 1.35, 1.34 maybe a little lower according top my technicals.
This all supports your view that the rally we've had in stocks this past week was a bounce in a primary down trend and they'll be turning down again anytime now. However, you mentioned a S&P 500 trendline, is that on a weekly, daily, or hourly chart? I'm not seeing that trendline you're referring to.
Pull up a chart of the SP-500 over the last year using daily bars. Connect the 08/17/09, 09/03/09 and 11/02/09 lows. There's your previous support line now acting as resistance.
It doesn't mean the market turns here and goes into crash and burn mode but it's a level to be aware of since we're also just a tad below the 50-day MA. It looks to me like a good entry point for short-positions.
In terms of the broader markets, my gut feeling is that the top of the year is already in and we will get a range bound market (given the lack of upside growth drivers and secular high unemployment) for 2010. Trading the ranges will be the way to go. At least that's how I see it.