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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... More
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  • S&P Reversal On Cue

    The S&P (SPY) continue to track along a rising wedge that starts in 2009 and took shape last year. The pattern has now predicted five bottoms and three tops in the last year. To me, it feels toppy. But who knows what shape the topping pattern will take? A double top? A clean break from new highs? A head and shoulders? We shall see. Junk bonds remain unflinching, showing unperturbed confidence in corporate balance sheets and the market at large. If we ultimately see an upside break to this pattern, I suspect it will be because inflation has broken free and all asset prices are heading skyward.

    I have drawn the full picture many times. Here is a SPY chart from the last year:

    (click to enlarge)

    Momentum stocks may be putting (temporary?) bottoms in place at supporting price areas. Many of the high-fliers that have suffered dramatic losses in the last month have similar charts. Most broke down from longer term rising wedges and put a bullish reversal "wick" on the chart yesterday. Here is a look at some of charts that look like possible reversals to me.

    Small Caps (IWM) have formed a bullish falling wedge in the recent sell-off and seem poised for a possible rally after yesterday's reversal:

    (click to enlarge)

    Amazon (AMZN) has formed a bullish falling wedge in this sell-off. A break above resistance would seem to set the stage for a rally to 340 or higher:

    (click to enlarge)

    Yelp (YELP) has also sold off hard after breaking down from a bearish wedge. It if takes out the downtrending resistance, it may rally:

    (click to enlarge)

    Tesla (TSLA) put a big reversal wick on the chart yesterday, finding support at its 2013 highs:

    (click to enlarge)

    At this point, I still suspect the market is in a topping process. But I've thought I was seeing topping action at this time of year EVERY year since 2010. I will try to hold my bearishness loosely. Speaking of bearishness, a couple of bearish position that seem appropriate: Coffee (JO) seems to have confirmed suspicions of a double-top with wretched action the last couple of days:

    (click to enlarge)

    Bank of America (BAC) seems to have confirmed the breakdown from its rising wedge. There is room for a rally, but I suspect more downside in the mid-term.

    (click to enlarge)

    I still like copper as a short, but then I read that Dennis Gartman does too. And so do most traders. Seems like two very good reasons to bail on the trade. We shall see.

    Disclosure: I am long TSLA.

    Additional disclosure: I have put options on JJC and JO, and am short BAC and IWM.

    Tags: SPY, SSO, SDS, AMZN, YELP, TSLA, JO, JJC, BAC
    Apr 16 1:51 PM | Link | Comment!
  • Commodities And Emerging Markets Update

    Some very interesting action in commodities and emerging markets of late. The growth components of the story continue to look very vulnerable.

    The broad emerging markets ETF (EEM) has hit downtrending resistance and appears to be turning lower.

    (click to enlarge)

    Brazil (EWZ) is behaving in-line with that analysis, and appears poised to drop.

    (click to enlarge)

    Last month, copper (JJC) broke support that dates back to 2009. It rallied back to that trend line and is dropping again today (Tuesday). A new low would be meaningful.

    (click to enlarge)

    Coffee (JO) made some serious money for those who held it in the first quarter, rallying over 100% from its lows late last year. It may now be putting a double-top in place.

    (click to enlarge)

    One of the more interesting plays to me is gold miners (GDX) and (GDXJ). I have been long GDXJ for a little while now and am still holding. What once looked like a possible breakout from a bullish falling wedge has morphed into a possible inverse head-and-shoulders. Today's action (4/15) brings GDXJ down to a point of multiple support lines that would seem like a good line in the sand. If a large gap up (3%) should occur tomorrow, I would take that as a very bullish sign as today's pricing could be viewed as an isolated doji star.

    (click to enlarge)

    Disclosure: I am long GDXJ.

    Additional disclosure: I own JJC and JO puts.

    Tags: EEM, EWZ, JJC, DBC, JO, GDX, GDXJ
    Apr 15 12:56 PM | Link | 2 Comments
  • Key Support Being Tested

    Key support is being tested across major U.S. indexes.

    The S&P (SPY) is flirting once again with a supporting trend line from the 2009 lows. The line has been briefly broken at times, so I would want to see a solid break over multiple weeks before being fully convinced that the uptrend is broken.

    (click to enlarge)

    Small caps (IWM) have significantly underperformed the broader market of late. It broke under a smaller rising wedge last month, and is now hitting a support line that dates back to the 2009 lows.

    (click to enlarge)

    Perhaps the most interesting evidence of market support is the resilience that junk bonds (JNK) continue to evidence.

    (click to enlarge)

    Disclosure: I am short IWM.

    Additional disclosure: I am also long RWM calls.

    Tags: SPY, SSO, SDS, JNK, HYG, IWM, RWM
    Apr 15 12:27 PM | Link | Comment!
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