Thursday, January 29, 2009

Bullish on Gold

Gold has done very well technically lately. On Thursday it reached 910 and that was after a nice retracement midweek to the 880 level. I think gold is poised to breakout higher in the coming weeks and months. I see this as being a multi month move in which could also mark a top in the dollar. The dollar has had a great 6 month rally and during that time gold has sold off but not as sharply as nearly every commodity under the sun.

Looking at the long term chart of gold you can see that most of 08 was spent consolidating in a massive bull flag after the rally prior. You can see that gold is now breaking out of this bull flag and headed higher. If you apply a fib retracement from the entire move of the last 4 years or so when gold was down around 400 to the recent peak then the 50% retrace was right near the 700 zone where the gold market bottomed this past year.

Looking more short term and you can see the last few months have seen gold stair stepping higher and each retracement has been met with buyers. Now with gold breaking out over 900 what is the game plan? If you're long then stay long. If youre not long then either buy it here in the low 900s or wait for the current leg higher to retrace and then buy.

I can see gold getting into the 960s within a month or so. My target for the next 6-9 months is much higher at 1150. That's roughly a 127.2% fib extension of the large multi year move in the chart. Just stay away from the gold miners because you incur company risk when you buy a miner. If gold comes back down below 840 then this trade is invalid.

If you think gold is going higher, like I do, then just go long GLD.

830 is Make Or Break

Thursday was a ugly day from the nasty econ data premarket. Gapped down and stayed down closing near the lows. The gap from yesterday filled and even gave us a nice bounce but that then faded and proved to be a nice short entry near 850 resistance.

I think 830 SPX is key support to see whether we continue the recent rally or go make new lows. 830 is the 61.8% retracement of the recent rally from last week. If we break 830 then I think we could be in trouble and headed back below 800. But for Friday it should be a choppy day in the 830s-840s as the bulls and bears play tug of war in that ambush zone.

The pivot point for Friday is 847. If we open up above that level then I want to be looking for a test of the pivot and go long. I wouldnt be surprised if they try to push it down into the 830s before any rebound rally but if we lose the 830s then watch out below. If we have trouble holding the pivot then we could go back into the 830s and I'd be looking for short entries beneath that pivot.

Wednesday, January 28, 2009

Calm Down

It was a great day to be long on Wednesday as we gapped up and ranaway with it not even filling. Closing in the 870 area is a nice sign but we still have plenty of resistance overhead. So don't fall in love with the upside. I do think this can be the start of a nice extended move higher that may even get us to the 1000 SPX finally.

For Thursday, the pivot is at 867.50. We are trading a bit below that currently overnight so if we open above it then I would take pullbacks to the pivot as longs. If we get over the 880 level then I can see some serious short covering push us into 900. Its going to be key as to where we open up in relation to the pivot. Today was a serious rally and I dont think it pulls back quite yet.

If we do however manage to fail at the pivot and fall then I would take retracements into that pivot as shorts. Should be an interesting day in which I think the rally continues but who knows.

Tuesday, January 27, 2009

Rally Time?

Tuesday was a nice tight inside day pattern day on major indices as we coiled up like a spring beneath the 850 level. I think we are headed higher and the chart to the left should convince you of this possible short term rally coming. The last few weeks we have been forming a very quiet cup and handle patttern on the SPX. Cup and handles are bullish and reliable. It should be a good for a continuation of the recent advance.

Yesterday's long ambush that came down to 825 is still in effect and I have a target up to 866 gap fill on this. There was also a great long ambush trade that came down to just about the pivot of 835 on Tuesday. We raced higher after that pullback and are now actually ripping overnight in the futures. The ES is trading 855.50 currently and will probably gap up considerably in the morning.

The game plan for Wednesday is simple. Go long on retracements of big moves. I am bullish but remember the FOMC decision is at 2:15 pm et. The daily pivot point is at 840. I doubt we get down there in the morning because of the strength of the overnight rally. This might be a runaway gap that does not get filled. Anything can happen of course but if we got anywhere close to a gap fill or pivot play then I would be a buyer of it.

On the other hand if we gap up over 860ish then it might just be prudent to hold off and see how the market pulls back. We should see some decent resistance at 866-870 assuming we reach it so we shall see.

Monday, January 26, 2009

Bull Trap?

Monday turned out to be pretty damn bullish from an opening gap standpoint that was not filled until the end of day when we bounced in the mid 820s (just above the pivot) and then rallied into the close but off the highs of the day. I liked that we closed strong and would think that the market can continue higher the next few days at least.

The interesting part about todays pullback of 850 was that it came down to about 825 and then proceeded to bounce. Why dat?

Well that 825.50 level was a ambush long trade that was a 50% retracement of the rally from Friday's lows to Monday's highs. These markets don't just move like this because of coincidence. Take note. By the way the target on the long ambush that began late Monday is up at 861.

For Tuesday the pivot point is 835.50. We are trading up strongly overnight so far and are at 841. If we gap up and hold the pivot then I would go long the market at that pivot level. But the pivot just above the gap fill so they may want to fill that gap, assuming it does gap up of course. If it fills the gap and bumps its head on the pivot (resistance) and fails then I would be taking shorts below that pivot.

Overall I do think we have a chance at rallying up to the 866 level the next few days if they break this market thru the 850 area.

Sunday, January 25, 2009

This Week's Trade 1/26

I believe this will be a telling week in the market and may very well determine the trend for the next several weeks. We are so close to breaking that 800 level on the SPX so I would think that the shorts might push the market down to retest the lows. However, if we do hold the 800 mark then we should be in for a heck of a move higher.

I like to take a look at the longer term trend as much as possible because the long term direction guides the short term. Looking at the weekly chart displayed you can see that the RSI is still downtrending and has shown NO signal of breaking this downtrend even as the market has had short lived bear market rallies. Until this weekly RSI shows a sign of reversing then you should assume the bear market continues. Period.

After we gapped down late last week multiple times, the market filled the gap and rallied. It will be interesting to see if this pattern breaks Monday because it looks like we may gap down again as of Sunday night. The ES futures are down around 815 after selling off under the pivot tonight.

For Monday, the daily pivot stands at 821.50. If we open below it then I would look for a test of that level and then a rollover where there could be a good short entry. I am not bullish on Monday unless we can get clear over the pivot and preferably over 825. I dont really think we rally Monday but of course anything may happen. Just be ready for a ugly day if we cannot get over the pivot and even more so if we breakdown under 800.

Economic data this week is heavy and includes:

Monday- Existing Home Sales, Leading Indicators
Tuesday- Consumer Confidence, Case Schiller Index
Wednesday- FOMC rate decision (which doesnt really matter since rates are essentially at 0)
Thursday- Durable Orders, New Home Sales, Jobless Claims
Friday- GDP Q4, Chicago PMI, Michigan Sentiment, Employment Cost Index

Overall, it will be an interesting week in which I think volatility could expand and as traders, thats what we wanna hear. I think before we have any kind of sustainable rally in the markets that the banks MUST take part in it or even lead the way. That hasn't happened, with the XLF making new lows last week and the transports very close to do the same, I just cannot be bullish on this market in any timeframe. You gotta trade the market you have, not the one you want. Either way, trade safe.

Thursday, January 22, 2009

Turn Around Thursday

After we gapped down hard below the pivot today the market sold off to the 807 area. It was quite the super charged rally that followed. We ran all the way back up to the 836.50 gap fill and sold off from there perfectly. You could not have gotten a more precise gap fill. The last hour the market was all over the place but we finished above the important 820 level.

Another crucial thing to take note of about Thursday's action is that we formed an inside day on the SPX. This is a very powerful pattern that usually results in the next day giving us a large move in either direction. If I were to pick a direction I think I just may lean to the upside here.

For Friday the pivot on the ES futures is 822.50. Right now we are trading right at that level so it should be interesting to see how we open. If we do stay near this pivot I wanna look for long trades in the morning as I think they might push this thing into the 850s by the weekend. We still have that gap fill zone in the 860s as well.

If we fail to get over the pivot in the morning then I will be looking to trade from the short side and we could easily see the low 800s once again if this 820 area fails to hold. It will be interesting to see who wins the tug of war going into the weekend but I do think we are in for a nice move either way Friday.

Wednesday, January 21, 2009

Just Another 4% Day

Wow! The only thing that sucks worse than not being long during a rally like we saw today--is being short lol. And honestly after we struggled to overtake the pivot midday multiple times I began to start getting bearish. But the market sure showed you why to never predict a move during lunchtime for the east coast. After the 2pm et time they just started buying this market to the moon. We blew through a few decent sized ambush shorts that I thought would at least slow down the rally. It was only a part of a series of smaller ambush long trades into the close. Just unreal how many 50% retracements in the last two hours were bought.

I think this market really blasted off after news came out about BAC and JPM ceo's buying a ton of common stock. Pretty good way to inspire temporary confidence, we'll see if it lasts. After the bell, AAPL blew out their earnings estimates and will gap up nicely in the morning. That will almost surely boost the QQQQ and the Nazz. Don't forget we have some econ data in the morning that could effect how we open.

For Thursday, the pivot is at 825.25. My bias will be to the bullish side as long as we stay above this pivot point. Also there is a possible ambush long trade at 823.25. That trade has a target of 845.75. There is also a much larger ambush short zone at 855. We could very well fill the gap at 866 from last week if we get any steam behind this rally.

If we fail to hold above the pivot tomorrow it could get ugly into the weekend, again. But as we are trading 840 right now I think that pivot has a good shot of supporting us Thursday and extending the market higher. Trade safe.

Tuesday, January 20, 2009

Free Fallin'

What a bloodbath. The SPX lost some key support levels Tuesday that I believe were crucial to any chance of an extended rally. In my post last night I mentioned that if we held the lows of last week it should be bullish. Well scratch that. We blew right thru those lows of 812.75 without a problem. After the market close the ES futures hit a low of 797.50 and now are actually rallying higher to 814.

Which is where the daily pivot for Wednesday comes in. I have the daily pivot at 814.25. Should be interesting to see if we fail the pivot overnight. If we gap up--which would not be surprising after today's purely horrific day on a market internal standpoint--then I would watch for an ambush short to develop at 820.50. We are due for a snapback as the market really got overextended today. Not saying it lasts long if it comes though. We have monster resistance above us now with potential ambush shorts all the way up. If we fail at the 820.50 ambush short then I could see a target of 790.75 on this trade.

Remember as a trader you don't care where the price action is going. And I'm still of the opinion that we hold the November lows in this "leg down" but that could just be the voice of hope. Don't get caught up in the "news" or the numbers but rather focus on the signals the charts give you intraday and act on them. Mark Douglas said it best in his book "Trading in the Zone" when he said, "Have an unshakeable belief in uncertainty. Have rigid rules, but flexible expectations".

Monday, January 19, 2009

This Week's Trade 1/20

The futures market was open overnight Sunday into MLK Day and at first gapped up to the 865 area, but then sold off and closed down around 840. For a low volume holiday session it was quite the range. So what to expect for Tuesday and the coming week?

Looking at the intermediate term using a daily chart to the left I have noticed that last weeks low also coincided with an ambush long that triggered and held the pivotal 815 level. From the lows of November to the highs of January. The fib retracement I have drawn has a first target of 991 on the SPX. If we hold last weeks low then I see no reason why this market cant grind higher in the coming month to reach that target and perhaps even beyond.

For Tuesday, the daily pivot is at 839.25. If we gap up above this area I want to look for long signals to buy the market. If we hold the pivot I think we can continue higher from Friday and maybe get to the gap fill of 866 from last Wed.

If we lose the pivot after gapping down then I want to watch for shorts setting up but I am going into the week with a slightly bullish bias.

Tuesday is Inauguration Day in DC so you should see some high emotion out there. Do not trade with emotion. I dont care if Obama lifts the markets with his speech. Just trade the charts and look for the trend to guide your trading. Not emotion.

Economic data for this week is very light and includes:

Thursday- Building permits, Housing Starts, Jobless Claims.

Overall, we could be setting up for more upside in the intermediate term but it may still be choppy here in the next few days until we get back over the 880 resistance level. Trade safe.

Friday, January 16, 2009

Gap Fill and More

Pretty interesting wild day in the markets on Friday. After gapping higher nicely up to the 856 level, as I said would happen yesterday we filled the gap like textbook and even sold off further past the pivot at 834. I was pretty bearish on this and took some short ES trades in the morning.

Midday was a choppy time and the market found its footing after hitting lows around 826. This 826 support was the area I mentioned in yesterday's post that would be very bearish if we broke. We did not. We rallied hard into the close and finished near 850. There was a few very nice long ambush trades in the rally higher.

Gold had a monster up day but I would continue to be bearish on gold until it broke 900. Oil is looking like it wants to bounce once they roll over the new contract next week. The dollar rallied nice this week but pulled back a bit Friday. Overall, the commodity markets caught a bid Friday.

Next week should be fun to watch as I think we have hit a crucial area. The low yesterday marked roughly a 61.8% retracement from the Nov-Jan rally. We bounced sharply off that level and so if we grind higher I think we could be in for a much higher move in the coming week and months. Have a nice weekend.

Thursday, January 15, 2009

Roller Coaster

Wow, what a reversal intraday after we hit lows of 812.75 on the ES. There were a few decent short setups early on but at midday the shorts simply got cover-happy. The rally pulled back in the last hour after it got to the 844 ambush short zone. Coming back down to 830 the ES bounced at that level, which was an abmush long of the late day advance. It held perfectly and the ES added another 10 points into the close. Just an unreal sort of day.

Tomorrow is options ex for Jan and that means anything can happen basically but I have a feeling the market melts up a bit higher Friday. We have a gap fill zone from Wed. on the table up to the 866 area. Pretty good shot we attempt to fill that gap if momentum stays on the bulls' side.

For Friday, the pivot point is at 834. We are trading 845 right now overnight. I would like to go long on a test of the pivot in the morning but I'm not sure it gets down there. If not then we will be looking to buy ambush longs as long as we stay above that pivot. I think a first target could give us 857. And then if we rally higher than that we should hit some selling around that gap fill zone of 866.

If we fail to rally then a break of 826 would make me pretty bearish going to the weekend. We'll see what happens in the morning. Trade safe.

Wednesday, January 14, 2009


So after a small bounce overnight back up to the 875 area the market gapped down Wed. and continued lower allll day long. There were a couple of pretty good short entries on ambushes in the early morning and even in the late day action. Drawing a fib retracement from the open to the lows of mid morning at 832.50, you would find a ambush short at the 843 level. The market peeked its head over 845 for a split second late in the day, only to rollover and retest the lows the of the day. That was probably the better trade of the day.

Wednesday was full of news driven trading and it will continue that way it seems Thursday as after hours BAC announced that they are running out of money essentially, lol. Also in case you have been on the moon since about 5pm et then you have heard that Steve Jobs is taking a medical leave till June. AAPL stock down hardcore after hours. Honestly its probably a buy (for a trade) at the open.

For Thursday the daily pivot on the ES futures is 849. It looks like we could gap down again at the open as we are now trading 832 presently. If we at all get any sort of gap fill or retest of the pivot point then I wanna be looking to sell it. There is also a possible ambush short just above the 850 area so I would not be taking longs unless we shot back above 860 or so. Should be a interesting day. Lots of news due out before the open so it should be a fun one.

Tuesday, January 13, 2009

Choppy Waters

Tuesday was a very choppy sideways market after the morning short ambush that I anticipated near the 873 area. We then fell to the 857 level where we bounced and the rest of the day was just a chop fest. In the latter half of the day it did not surprise me to see the 15min chart of the ES with a flat 20 and 50 period ma. When this happens it is always a good signal to step back and just not trade. Trading when the market is flat is a recipe for stop out after stop out.

The game plan for Wednesday is to keep an eye on the pivot point on the ES. The pivot for Wed. is 866.50. We are trading low 870s as I type overnight and I would expect this pivot to hold in the morning. If we fill any gap at the open then I would like to look for a long at the pivot of 866.50. This is also a long ambush from Tuesday's lows to Wed. overnight high (so far). If we do bounce in the mid 860s area then I would look at the potential for a short covering rally up to 879 before running into some resistance. If we really get going then they may push the market up to the 885 level, where there is a setup for a bit larger ambush short but that may not come into play till Thursday.

We will see what happens in the morning. Trade safe.

Monday, January 12, 2009

Monday Meltdown

After we gapped down Monday we didn't fill the gap at all. There were a few very nice ambush short trades on retracements. It was just a down day from the get go and losing 875 to the downside got me tilted much more towards the bearish side for the time being. We needed to hold that key level or any hope of a move back over the 915 spot. Even with the last hour bounce we closed at 870.

For Tuesday I want to start out neutral and look at the action around the pivot to determine where the days trend may go. The pivot for Tuesday is at 871.50. There is a lot of resistance between the 875-880 area so until we get over that there is no way I will be taking longs. I believe there is a short ambush trade setup at the 873 level. That short ambush has a possible target of 854.50 (which is coincidently right near the lows from the last week of December). If we fail to break above the pivot in the morning then we could see another day of selling that might take us to the mid 850s.

Also it looks like the commodities (anything from oil and gold to wheat and soybeans) got totally clobbered on Monday. Seems like oil specifically is leading the market lately. I think oil at least tests the 34 area this week so if that's the case, then the SPX could go lower as well. Trade safe.

Sunday, January 11, 2009

This Week's Trade 1/12

This week the market needs to prove itself and show which direction it will go. Last week was a pullback week but if we are going to resume the upward grind of the prior few weeks the SPX needs to stay above the 875 support level. If we close below that then you have no choice but to be bearish as that would be a much larger pullback then desired. The bulls will want to get this back above the 915 area which is a spot of heavy resistance.

For Monday I am starting neutral and looking for a decisive move either below 875 or above 900. More likely I will take short entries in the beginning of the week. The daily pivot for Monday on the ES is at 894.25. As of Sunday evening we are trading 881.50. If we get a move back up to the pivot then I wanna be a seller of that if it rolls over. Also there is a short ambush possibly setting up if we get to the 891.25 area and roll over. I will not be considering long setups unless we somehow get over 900.

Tuesday- Treasury Budget

Wednesday- Retail Sales, Business Inventories

Thursday- PPI, Jobless Claims, Philly Fed

Friday- CPI, Capacity Utilization, Industrial Production, Michigan Sentiment

So overall this should be an interesting week to see if the SPX retakes the 915 level to the upside or breaks below the 875 support area and continues lower. Anything can happen so be ready for both scenarios. And of course trade with stops.

Friday, January 9, 2009

Trading The Ambush

Friday was a pretty interesting day and the 15min futures chart to the left says it all. After the jobs number came out premarket the futures spiked up to the 914 area where it topped for the day. As soon as the market opened the futures just fell off a cliff. Promptly hitting lows of around 887 soon after. Much of the day was then spent consolidating and making some believe we could actually bounce. You couldn't deny that the 890 level was holding strong all day long as a good support.

I like to fade retracements after major moves and so in todays action a great setup came in the last two hours of the day. When a major move is made you can draw a fib retracement from the start to finish of the move and then monitor how the retracement acts. Usually a 50% retracement is met with a failure and resumption of the natural trend. Its in this 50%-61.8% "ambush zone" that the market makes a decision.

Today, as I have highlighted with an oval in the chart, proved to be a great short entry at the 50% retracement of the morning selloff. We tagged the 898 level and began to slide all the way into the close. As soon you you saw weakness in this 50% retrace zone then you had a great signal to short the market. If it were to continue rallying thru the 61.8% retrace red dashed line at 901 then you would have cut your losses. But the point is that trading the "ambush zone" gives you an edge and predetermines your stop loss point before entry.

Also at nearly the exact time we hit that 898 mark and pulled off it, the $TICK (which is a measure of internal market strength) showed a +1000 reading. That is a good sign to sell your longs usually or even go short.

In this example today you also had the daily pivot just above that area providing even more resistance so the short was a good risk/reward. As you can see we ended up closing near the lows of the day and in the last hour each 15 minute candlestick was red.

Thursday, January 8, 2009

Jobs Jobs Jobs

So Thursday was a crazy chop fest of a day in the market. Just boring action period. You had to be quick with your scalps today as the moves just didn't trend. But overall that was what I expected as I said yesterday. We got the morning sell and somewhat of a bounce into the close.

For Friday I am expecting a possible rally believe it or not. Jobs data due out premarket will be the story of the day. In my opinion anything less than 500k jobs lost in Dec and less than 7% rate is bullish and you very well may see a nice bounce in the markets into the weekend. Of course if we get a nasty surprise we could just as easily go to 880 as a first stop.

On the charts we are setup nicely to rally because today we came down to the low 890s and that is just beyond the 50% retracement of the rally from last week. If we can hold that retrace level around 890 this market can really start to tear. And a better than expected jobs number just may be that catalyst. We'll see.

On the upside I could see us moving to 963 as the next swing target if we start the leg higher. For Friday the pivot point is at 902 so my idea would be to see how we open (we are almost surely going to gap one way or the other after "the number" comes out). If we gap higher I would like to be a buyer of a partial gap fill or retest of the pivot.

I think we could easily see 916 if we go up. There will be some resistance in the 916-920 area. That's a 50% retrace of the move down from Tues. If we get over the 923 level then we should see some real buying. So anything can happen Friday, just be ready to play either side once the trend establishes itself.

Wednesday, January 7, 2009


Wednesday we saw just about exactly what I highlighted in the previous nights analysis. After we gapped down in the morning we had no attempt at a gap fill. There were only few retracements throughout the morning that provided from short entries. But if you got in and held till the close you had a great day.

The market slid on Wed. because it was technically set up to DO SO. Of course the headlines will blame the bad news from Alcoa and Intel. Sure that added fuel but the point is that these charts don't lie and showed signs of rolling over on Tuesday. The market is having a nice retracement of the big rally the last week or so.

Oil fell off a cliff just as expected after the inventory data. Gold is rolling over and looks to be having trouble getting over that 50 day ma so I am not interested in gold until it gets back over 900. Commodities led the rally last week and seem to be leading the pullback midweek.

The question is whether this will be more than a pullback. I am looking for the 890 level tomorrow to show some support. I think we may bounce in the that area. However, if we do break, and close, below the 876-880 crucial support then I will become more bearish. As for now we are in a normal pullback mode. The 50% retrace should give us some bounce so we shall see.

Thursday could be one of those sell in the morning days followed by reversal in afternoon type situations. Obama is speaking at 11am et on the economy so it will be interesting to see if he inspires the markets.

Tuesday, January 6, 2009

Indecision Day

Tuesday the markets chopped around a bit and closed higher slightly overall. However, we failed to break the morning high of 942 on the futures and seemed to really run into resistance above the 930 area on the SPX. Looks to me like the market is a little tired and in need of a pullback after a large rally the past week or so.

For Wednesday the pivot point on the ES is 932. I think if we gap down then a retest of the pivot in the low 930s could be a god chance to go short. If we break Tuesday's lows then I think we can easily see 918, which is a good support area to expect a bounce because it is the previous area of resistance we broke out of last Friday.

If we do break that 918 area then I will be watching for a move down to the low 900s minimum with a possibility of seeing the mid 890s. Remember that we are up about 90 SPX points in one week roughly so giving back 45 of them would be nothing more than a healthy 50% retracement.
It will be interesting to see how oil reacts Wed to the inventory report. Oil had a ugly reversal day on Tuesday closing at 48.5 after getting up to 50.5. I would be a seller of energy here and perhaps expect a move back down into the low 40s.

Overall look for a pullback going into midweek but if we somehow breakout over the 940 area I would like to see a close on the 30min chart to confirm. Trade safe.

Monday, January 5, 2009

Bull Trap?

Well as we kick 09, the markets gave back a little gain today from Friday. And that is just fine. I am still bullish intermediate term but think short term we could see a pullback into the low 900s after the selloff late in the day today.

Market failed to break 934 and proceeded to come right back down to the pivot poitn where it then bounced into the close. Overall the action was very choppy for much of the day and volume was still lacking at about half of normal.

For Tuesday the pivot point on the ES futures is 926. The futures are grinding up just above that overnight as I type. I would look for weakness near the open and if the ES falls below the pivot then try to short any retest of the pivot. I would take longs on retraces of the futures if the ES got over 934 Tuesday.

Fed Minutes are due out at 2:00 pm et so be aware and watch for possible reversals of trend at end of day (as if that isnt common knowledge lately).

Oil is up 25% in like 3 days which is insane and the dollar rallied nicely today. I would think oil is ready for at least a pullback near here so dont be rushing into any of the energy or ag names after these crazy runs. The dollar/euro pair got stopped cold around 1.39 Monday and looks to be a sell the rip mode.

Lastly I mentioned gold earlier and it got hammered today but closed well off the lows. I would not be long gold until it cleared the crucial 900 resistance level and that may take a bit more time to transpire. If it breaks 840 to the downside then it could see the low 800s once more.

The Bond Bubble

The last several months the bond market has been ripping higher and yields are collapsing (bond prices and yields move inversely). Yes and with all these fear struck investors looking for a "safe investment" they are piling into US treasuries. Thus forming a bubble. *Gasp* And yes like every bubble ever created, this one in the bond market will pop and money will flow into something else.

As you can see from the chart, bond futures are literally going straight up lately. Last week saw the first consecutive day pullback of this size since late October. I dont think the bonds have topped just yet. You are likely to see at least one more leg higher that may or may not make NEW highs of the 142 ish area.

It does look like this bubble will pop in the near future and when that happens you will see a outflow of money here and where will it go?

I think it goes into the gold market. At the same time it looks like gold is poised for a breakout over the 900 level. Gold has been consolidating for the better part of a year now after hitting all time highs around 1000. I will follow up with a look at the gold chart.

Sean Hyman from MyWealth has an equally interesting take on this bond bubble/gold trade.

Sunday, January 4, 2009

This Week's Trade 1/5

This week I am looking to see any signs of continuation of the low volume rally last week. Pivot point for Monday is at 918.75 on the ES futures. If we gap up above that in the morning then I would look to buy a retest and then look for pullbacks into the main trend of the day. It does feel like we wanna rally higher this week. We shall see what happens but I am gonna start the week with a slightly bullish bias. That pivot point is also the same level of which the month long consolidation broke out of on Friday so a retest of that now support is a good buy signal.

Of course we have ran up quickly and a pullback would not be surprising. However if we do get one I think it is still a good buy in the intermediate term. The move from last weeks low of 853 to the high of 932.75 has a 50% level of 893. If we do get down to that level I think its a buy. Below the 884 area and we will have to look at more short side trades.

Monday- Construction Spending, Auto and Truck Sales

Tuesday- Factory Orders, ISM Services

Thursday- Jobless Claims, Consumer Credit

Friday- Nonfarm Payrolls, Unemployment, Wholesale Inventories

Of course everyone will be waiting for the crucial jobs report Friday but bad news is already expected. Let's see how the price action reacts early this week to more volume back in the market and a fresh new year on the books. I think the path of least resistance is higher in the intermediate but don't be alarmed to see a pullback Monday and if it happens, look for buy signals on those retraces.

Friday, January 2, 2009

Party Like It's 2007..

So if you woke up today and were a viewer of CNBC you might have thought we turned back the clock to a few years back or even started the next great bull market.

Lol, umm no.

While this move does look good on the chart and we have finally broken out of the month long range below 920, I would like to see the big volume come in next week and provide a continuation move.

Bottom line is now that we have closed over 920 on the SPX we have a nice floor of support below us. Get long on some swing trades here and stop yourself out on a close below 910ish. Like I have been saying since early December, I think with this close over 920 we could see a nice short squeeze of a rally up to the 1000 level. Perhaps a bit closer to the 1020 area into the Obama inauguration.

I have a bullish bias above this 910 level. An interesting thing we saw today was that new highs outpaced new lows for the first time in awhile. Not by much but nonetheless we saw more new highs, which is bullish.

Looking forward to seeing regular volume come back to the post-holiday market next week.