Dow

[ollie]

delinky, even I was showing signs of withdrawal yesterday, ??

[ananda77]

US Calendar:
U.S. ISM slipped to 52.6 in Sep, below median 53.3 vs 52.9 in Aug
U.S. construction spending rose 0.8% in Aug, above med -0.3% vs -1.1% Jul
U.S. NAR pending home sales surge 6.4% to 103.8 in Aug vs 97.6 in Jul
U.S. personal income +0.2% in Aug, in line
U. S. Personal Spending Aug 1.3% consensus 1.1% prior 0.3%
U.S. initial jobless claims rose 17k to 551k, above median 535k for Sep-26 week

Stock Market:

...SPX 500 under pressure following the release of a mixed data stream and as a result, a thorough test of key support range Sept 14 Low *1035/Sept 9 congestion *1027 is now underway

...at present, the index rebounded from intraday Low *1034 and holding above so far

... a sucessful defense of key support range would form the basis to fire the index up for the initial Sept 16 High *1069 on its way to a second test of the *1080/*1092/ *1119 target range

...failure in the key support range on a Close basis would substantially increase risk for a downside break-out to the September Low *992 initially

...looking ahead, still very much in favor of the double top scenario between *1080/*1092/*1119 that should trigger a sharp 20% (+) sell-off during most of Q4 that should affirm its July low at 869 before stabilizing

Trading Strategy: sideline (safest);
-hedge: neutral to bullish bias to *1018/*1044/*1100; no equity exposure;
-hedge: short 10% equity covered; short bias (+); with equity exposure;

Long Term: THE BEAR

_no guarantees and trading strategies are just ideas_

Kind Regards

[ananda77]

However, still feels a bit bearish to me.

...fundamentally, could not agree more

...two things stand out about this rally:

-Wall Street 'Pros' pushing it based on the theory of pricing the market on 'mid-cycle earnings'
-happy, no clue economists et. al pushing it on 'less negative data' as actually 'bullish'

...technically, the index is at key support and some sort of short term bounce is most likely including a second test of before mentioned target range before a larger sell-off

Kind Regards

[ananda77]

US Calendar:
U.S. nonfarm payrolls sank 263k in Sep, below median; jobless rate up to 9.8%
U.S. factory orders dove 0.8% in Aug, well below median 1.1% vs 1.4% in Jul
US Hourly Earnings Sep actual 0.1% prior 0.4%
US Average Workweek Sep actual 33.0 prior 33.1

Stock Market:

...SPX 500 under renewed pressure following the release of employment data and as a result traded down to 31 August Close *1020 intraday holding just above the 50 MA *1016

...traders/investors bought the index at this level keeping market direction in the neutral to bullish zone; the intraday rapid recovery bodes well for today's *1016 to be a bottom (Dow Close above Sep 9 Congestion *9497) that completes the first half of the expected major double top pattern in the *1080/*1092/*1119 target range followed by a sharp 20% (+) sell-off during most of Q4 that should affirm its July Low *869 before stabilizing

...the other side of the bargain features a Close below todays' intraday Low *1016 which would negate the double top pattern scenario and would strongly indicate, the Q4 20% (+) sell-off is already well on its way

Market Finish: market direction turned bearish towards the Close with increased selling becoming apparent; Dow missed key support Close by 9; Nasdaq by 1; SPX 500 Close above intraday Low *1016; upside momentum rolled over;

Current Elliot Wave commentary:

In summary: all the major stock indexes are in synch lower, with prices in the process of tracing out “five down” from the September peaks. There may be a little upward bounce early next week, but we are not certain of this potential. Regardless, we would view such a move as an opportunity for the bears because once the bounce exhausts, prices should decline again and make new lows. The initial downside support surrounds the September lows—9252± in the DJIA, 992± in the S&P—but much lower potential exists

Trading Strategy: sideline (safest);
-hedge: neutral to bullish bias to *1018/*1044/*1100; no equity exposure;
-hedge: short 10% equity covered; short bias (+); with equity exposure;

Long Term: THE BEAR

_no guarantees and trading strategies are just ideas_

Kind Regards

[Dr_Who]

Have you guys had a look at the China market graph. Looks like a top and moving down. This does concern me abit, cos China have been where the action is this entire year. I keep a close eye on China these days for directions.

[ananda77]

Have you guys had a look at the China market graph. Looks like a top and moving down. This does concern me abit, cos China have been where the action is this entire year. I keep a close eye on China these days for directions.

...that would be smashing nice if you would keep us informed about China developments; you could extend the US Markets thread to include the China Market;

Kind Regards

[ananda77]

Key Technical SP 500 Levels:

*1020 > 50-day MA and below >
*1008 > uptrend line March Low and below >
*992 > 02 Sept Low > and below
*869 Ultimate Support and below > (do not think it) (see attachment_1 = Free Data Chart)

SP 500 Major Pivot Point: (see attachment_2 = S&P 500)

SP 500 Fundamentals:

...The average U.S. institutional fund manager is up 22% for the year, outperforming the S&P 500 by some 400 basis points. This in turn suggests that there will be incentives to “hug the index” and try to hang on to that outperformance through year end. This in turn suggests that the stock market may end up losing a prime source of buying power — otherwise known as the panicky PM who has been desperately trying to make up for last year’s horrendous performance.

...And whether you look at operating or reported earnings, trailing or forward, the S&P 500 today is trading at multiples that are higher than they were at the market peak in October 2007. So we’re not talking about pricing the market with ‘mid-cycle’ multiples – it is trading at ‘late-cycle’ multiples.

...WHO HAS BEEN DOING THE BUYING?
We already ascertained earlier in the week that is hasn’t been Ma and Pa Kettle – in fact, the FT quotes data from TrimTabs showing that only $2.5 billion in net inflows has gone into U.S. equity funds and ETF’s since the March lows. Inflows into bond funds have been ten times as strong. We know that corporate insiders have been net sellers of size. And the buying power from short-covering subsided months ago.
The answer, and this validated by the FT on page 16 of yesterday’s edition, are the hedge funds. And once they begin to see signs that a V-shaped recovery is about as real as Santa or the tooth fairy, watch out. Because there aren’t any other buyers out there that can be identified. (see attachment_3/_3a = Core Holdings/Institutional Buy-Sell Spread)

US Long Bond Market:

...the Treasury market is signalling that deflation is the more profound risk. The yield curve is flattening big time and since mid-September the long bond has rallied more than 30 basis points. That is amazing and it means that the bond market crowd smells a rat somewhere – as it did when it rallied like this as the stock market was making new highs in the summer of 2007. As an aside, the last time the long bond yield was at 3.95% was in late April … when the S&P 500 was sitting at 855. We should add that real interest rates – the bond market’s proxy for real growth -- as measured by the yield on 10-year TIPS is all the way back to 1.5% after hitting a peak of just over 2% in early July and again, the last time it was where it is today, the S&P 500 was 20% lower than it is today.

...The real question is, if we in fact do have this sustained reflation trade going on, which is actually necessary to justify the earnings expectations embedded in equity valuation, why it is that the yield on the 10-year Treasury note isn't north of 5.0% already? Instead, it is 3.3%. And history shows that when bonds and stocks do diverge, as was the case in the summer of 1987, the fall of 1994, the summer of 1998, the winter of 2000 and the summer of 2007, it is the former that proved to be prescient.

Kind Regards

[eel]

Thanks V much your work is invaluable

[ananda77]

US Calendar:
U.S. ISM services index rose to 50.9 in Sep, above median 50 vs 48.4 Aug

Bond Market:
U.S. 10-year TIPS sale awarded at 1.51%, firm cover 3.12, indirect bid 44%
Treasury yields rebounded after firm TIPS, options trade faded Friday rally
The 10 year TIPS reopening auction was solid and bidding was aggressive. The yield was about 5 bps below expectations and the bid to cover of 3.12 was the highest since Jan 1999 and well above the average over the past two years of 2.17. Indirect bidders totaled 44%, slightly below the July auction of 49.7%. Bottom line, combining this with another breakout attempt in the price of gold and the US$ trading near recent lows and its clear that investors want inflation protection and are less sanguine with the inflation picture than the Fed is. The conventional 10 year note did trade lower in response as a yield of 3.20% doesn’t reflect much fear of inflation.

Stock Market:
...SPX 500 is extending its rebound today after a successful defense of the 31 August Close *1020 and the 50 MA *1016 last Friday; the index penetrated the initial up target *1041 intraday, but finished on the weak side *1040

...its successful defense indicates that *1016 remains a short term floor, but the continuous weak finish in the major US indexes also indicates and strenghtens the double top view in the *1080/*1092/*1119 target range; only an unexpected Close below SPX 500 *1016 would negate this scenario and would confirm, that the expected 20% (+) sell-off during Q4 is already well on its way

Trading Strategy: sideline (safest);
-hedge: neutral to bullish bias to *1018/*1044/*1100; no equity exposure;
-hedge: short 10% equity covered; short bias (+); with equity exposure;

Long Term: THE BEAR

_no guarantees and trading strategies are just ideas_

Kind Regards

[ananda77]

SPX 500 Monthly update:

...according to September month end data, the index is now in a bull market and current market weakness should not indicate a slide back into bear territory (see attachment > SPX 500 Monthly Index)

...current favorite quote for the short- to medium horizon:

-stash cash for minimum *869-

Kind Regards