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Playing the Ponzi
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Why “Playing the Ponzi”? I view the entire monetary and financial system as something of a Ponzi scheme. Starting with currency that is created as debt, and running straight through a global economic model that is based on infinite growth in a finite world. This won’t end well. I’d go a step... More
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  • Market Fragility Returns

    I have been harping all year that signs of a major top abound, and the scene continues to unfold. I have no conviction at the moment as to whether we bounce a little here or continue lower. In the big picture, I remain exceedingly confident that we are witnessing a major topping process. In the short term, I could imagine us bouncing here. I am net short, but have covered my VXX positions and bought a little XIV (inverse VIX) as a hedge of sorts. Today, even with the market very red, VIX underperformed significantly. It may be that fear is overblown for the moment.

    Here is a long term look at the S&P (NYSEARCA:SPY). For those of you who have been following along on my blog, you've been seeing this rising wedge since early 2013. We had a significant violation of support in October. I suspect that softened the ground and we will see another significant breach by the end of January, if not much sooner.

    (click to enlarge)

    Here is a short term look at the S&P (futures). We see that the support line was violated once again and the 50 day moving average was also violated in the last week.

    (click to enlarge)

    The Nasdaq (NASDAQ:QQQ) has markedly outperformed for years. It has hit has an intermediate support line and pulling back from resistance. If the air starts to come out of this equity bubble, I expect Nasdaq would significantly underperform as traders sell winning positions in tech to cover losses in energy and high yield.

    (click to enlarge)

    Here is VIX. It is at levels that have often proved to be tops for fear. VIX also put a sizable wick onto the chart today.

    (click to enlarge)

    One commodity that I have been long (options) for awhile appears to finally be breaking out: wheat (NYSEARCA:WEAT). It is approaching the 200 day moving average, which should act as resistance, but it has been beaten down for so long that would seem to have plenty of room to run if it gets some momentum.

    (click to enlarge)

    Good luck trading in these volatile markets!

    Disclosure: The author is long XIV, QID.

    Additional disclosure: Long WEAT calls.

    Tags: SPY, SDS, SSO, QQQ, QID, QLD, VXX, XIV, WEAT
    Dec 15 10:01 PM | Link | Comment!
  • Index Chart Updates

    It looks to me like the charts of major U.S. indexes are in the clear for the moment. I still believe we are in the final inning(s) of a major top, but it seems like markets may grind higher itno the end of 2014. Most resistance was taken out two weeks ago. Last week, markets nudged higher despite (what I see as) significant macroeconomic and socio-political risk. Here is a chart of the S&P futures (NYSEARCA:SPY), on a weekly basis. While it is not facing resistance at the moment, it's worth noting the divergence of rising prices alongside weakening moneyflow over the last two years.

    (click to enlarge)

    The Nasdaq (NASDAQ:QQQ) is similarly comfortable, having broken through the bottom trendline(s). It doesn't appear to be facing resistance at the moment.

    (click to enlarge)

    Stepping back from the relative peace of the broad U.S. indexes, it's worth noting that Russell small caps (NYSEARCA:IWM) have reached the underside resistance of a multi-year rising wedge that recently broke. This is a significant test, and may foreshadow weakness in the broader indexes should small cups struggle here (as shorts might expect).

    (click to enlarge)

    Another source of potential risk worth keeping an eye on is the broader context of global equities. VEU, the Vanguard Global Equity fund, continues to show weakness.

    (click to enlarge)

    One final note is on QCOM. I pointed out a massive 20 year pattern in QCOM a few weeks ago, suggesting that it looked awfully bearish. Late last week, QCOM dropped 10% after rallying to the underside of its broken long-term (20 year) support. It's a large Nasdaq leader that is worth keeping a continuing eye on.

    (click to enlarge)

    Disclosure: The author is short QCOM.

    Tags: SPY, SSO, SDS, IWM, RWM, VEU, QCOM
    Nov 10 3:07 PM | Link | Comment!
  • Is The Market Primed To Bounce?

    The last few days witnessed small caps outperform the larger market, a signal that has foreshadowed rallies all year. We got a large reversal on Wednesday, another very nice reversal on Thursday and big upside follow-through (so far) on Friday. Over the last few days I have covered my shorts and gone long. Given that I am very bearish mid/long term, this strikes me as slightly crazy behavior on my own part, but I do love gambling and so far it has worked out okay.

    On to the charts. Here is the short term S&P Futures chart. I have spot-shadowed three targets that strike me as likely areas of future resistance: (1) the 200 day simple moving average (red dashed line), (2) a continuation of the steep downtrend that preceded the sell-off (black solid line), and (3) the 50 day simple moving average (blue dashed line). I would note that I think (4 - not highlighted) the underside of the broken long term resistance is a possibility is a possibility given how beautifully the reversal pattern is shaping up in the weekly chart. That scenario would have the S&P push past (3) and re-test old highs late in the year, hitting the underside of the old support trendline.

    (click to enlarge)

    When we pull back to a weekly perspective, we can see a "doji star" with a large bullish wick created this week by the S&P (NYSEARCA:SPY). It did so right at the 50 week simple moving average. On a weekly basis, we'd want to see positive follow-through next week to confirm the reversal.

    (click to enlarge)

    In keeping with the idea that stocks may rally from here, the 30 year Treasuries ETF (NYSEARCA:TLT) looks like it topped this week. This week's reversal put a huge bearish wick on TLT's weekly chart, and the ETF will likely close the week just under trendline resistance. It is a very bearish configuration for TLT in my opinion. That said, the support trendline isn't far off, so we'll see how those elements interact. Maybe it will fall to where both the 50 and 200 SMA'a are dancing, about 8% lower.

    (click to enlarge)

    I will note one other asset that looks interesting: gold (NYSEARCA:GLD). It has broken long term support and may be forming a (bearish) descending triangle pattern, but for now a multi-year support level is holding, and that level is also a 50% retracement of the 2005-2011 bull market.

    (click to enlarge)

    Good luck trading in these volatile waters!

    **UPDATE : Small caps notably under-performed the broader market Friday. Also VIX rallied a bit, suggesting that despite the big jump in the broad market, risk appetite remains muted. The big question for Monday and Tuesday will be: was this rally just a short squeeze?

    Tags: SPY, SSO, UPRO, SDS, SPXU, TLT, TBT, GLD
    Oct 18 10:36 AM | Link | Comment!
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