{"id":178,"date":"2009-06-01T18:03:50","date_gmt":"2009-06-01T22:03:50","guid":{"rendered":"http:\/\/www.cheapiv.com\/?p=178"},"modified":"2010-09-30T18:06:59","modified_gmt":"2010-09-30T22:06:59","slug":"trading-the-market-6-1-2009","status":"publish","type":"post","link":"http:\/\/www.cheapiv.com\/?p=178","title":{"rendered":"Trading the Market 6-1-2009"},"content":{"rendered":"

\u00e2\u20ac\u0153The markets are enjoying a huge rally this morning\u00e2\u20ac\u00a6.\u00e2\u20ac\u009d<\/strong><\/p>\n

That\u00e2\u20ac\u2122s how last week\u00e2\u20ac\u2122s Week Ahead began.\u00c2\u00a0 We really don\u00e2\u20ac\u2122t have to change a thing to make it fitting for this week.\u00c2\u00a0 May closed out in a very curious way last Friday.\u00c2\u00a0 Nearly 100 DOW points were tacked on in the closing minutes of that session.\u00c2\u00a0 \u00e2\u20ac\u0153End of the Month Markup Madness\u00e2\u20ac\u009d???\u00c2\u00a0 Use the headlines to entice the reluctant in JUST IN TIME for the terminal wave?\u00c2\u00a0 Possibly, but it is also possible that our friends wanted to get a running start on the \u00e2\u20ac\u0153buy on news\u00e2\u20ac\u009d GM bankruptcy short squeeze that seems to be launching the \u00e2\u20ac\u0153Blowoff\u00e2\u20ac\u009d phase that we were looking for about a month ago.\u00c2\u00a0 When we didn\u00e2\u20ac\u2122t see that phase unfold immediately, we began to focus on what we thought would be volatile manipulation in both directions driven primarily by the risk entailed in the inverted head & shoulders pattern that we\u00e2\u20ac\u2122ve had our eyes on.\u00c2\u00a0 Fortunately that\u00e2\u20ac\u2122s how things have played out but now that the DOW has blasted through 8600 we\u00e2\u20ac\u2122re guessing that the boys try to push it to the 9050 \u00e2\u20ac\u201c 9100 level.\u00c2\u00a0 The 8600 resistance has served us well but Goldman Sachs needs a new pair of shoes and thus with their business model severely damaged the proceeds need to come from trading.\u00c2\u00a0 Thus, another banner quarter for what the Fast Money boys would call the best and brightest.\u00c2\u00a0 It\u00e2\u20ac\u2122s gotta be tough to beat the markets when you not only know the news in advance but help to write it!<\/p>\n

So the rally that\u00e2\u20ac\u2122s defied most market watching cynics continues.\u00c2\u00a0 Fortunately our Technical Analysis has kept us from getting bearish on the market action even as we remain highly skeptical of the long term viability of China-enabled lighter fluid effect to keep things as toasty as the current crop of crowing perma-bulls would have us believe.\u00c2\u00a0 Commerce nearly halted in what was once the good ole USA in the fourth quarter of 2008 and first quarter of this \u00e2\u20ac\u0153transformational\u00e2\u20ac\u009d new year.\u00c2\u00a0 That\u00e2\u20ac\u2122s going to make it fairly easy for even a modest improvement to register in comparatively positive way in the economic statistics.\u00c2\u00a0 Plenty of pitfalls remain, in fact, there are far, far too many of them to delve into here in this Week Ahead.\u00c2\u00a0 BUT, if we\u00e2\u20ac\u2122re trading that\u00e2\u20ac\u2122s different time-horizon wise from investing generally and although we keep the macro problems in the back of our minds at all times, we still must not allow our long term concerns to prevent us from participating in rallies such as the one that we continue to witness.<\/p>\n

If statistics begin to matter again with respect to the downside, the most likely ones would be related to employment\/unemployment and they will be published at the tail end of this week.\u00c2\u00a0 If they\u00e2\u20ac\u2122re extra-fudged that could be the final phase of the blowoff phase but we don\u00e2\u20ac\u2122t want to get too far ahead of ourselves.\u00c2\u00a0 We state that though because those numbers are the best hope for bears.\u00c2\u00a0 They will likely latch onto those numbers as their capitulation buffer.\u00c2\u00a0 That is, if the blowoff unfolds this week and bears still haven\u00e2\u20ac\u2122t covered to that point, they\u00e2\u20ac\u2122ll be looking to those numbers as the catalyst to end the rally, which they could if ugly.\u00c2\u00a0 BUT, if those numbers are really well-done, that could break the remaining bears and bring frustrated from being too patient bulls of the sidelines.<\/p>\n

With all undue respect to the \u00e2\u20ac\u0153we\u00e2\u20ac\u2122re returning to business as usual\u00e2\u20ac\u009d perma-bull camp, there are obvious things that are starting to threaten the nascent recovery.\u00c2\u00a0 $70 oil , higher mortgage rates, a still worsening employment situation are a few that leap to mind.\u00c2\u00a0 But as far as inflation being dead, we\u00e2\u20ac\u2122d have to point to inflation in stock prices because they\u00e2\u20ac\u2122re perceived as the only game in town.\u00c2\u00a0 With respects to Ron Paul, Daniel Hannan, et al.,\u00c2\u00a0 and those that have made similar comments in the past, it does yet appear that many still believe to the contrary of: You cannot spend your way out of recession or borrow your way out of debt.<\/em><\/p>\n

To which we\u00e2\u20ac\u2122d add that much higher taxes, enormous debt, crushing future obligations and a world less interested in investing here than in their homelands await us.\u00c2\u00a0 Not to mention an unhealthy and enormous dose of socialism and entitlement explosions. <\/em><\/p>\n

If it were this easy than why aren\u00e2\u20ac\u2122t we doing it up even bigger than we are scheduled to? <\/em><\/p>\n

Keep this type of skepticism in your \u00e2\u20ac\u0153back pocket\u00e2\u20ac\u009d for later but for now let\u00e2\u20ac\u2122s trade the market we see.\u00c2\u00a0 Until we see the technicals that have served us well thus far begin to flash warning signs we have to keep the blinders on and go with the flow. <\/em><\/p>\n

<\/strong><\/p>\n

The Technical Picture:<\/strong><\/p>\n

\"Trading<\/p>\n

<\/em><\/p>\n

\u00e2\u20ac\u0153Just above is this week\u00e2\u20ac\u2122s updated chart.\u00c2\u00a0 Its color coded so it should be easy to follow.\u00c2\u00a0 Since this inflection point is what it is, the crew should be able to get a lot of mileage out of the market right now.\u00c2\u00a0 They feigned a break of sloped support last week but left 2 indecisive candles.\u00c2\u00a0 And they\u00e2\u20ac\u2122ve jam-jobbed things very strongly this morning giving new and patient shorts the treatment.\u00c2\u00a0 News permitting we think that the crew tries to head towards the other side of the neckline for even more fun with existing shorts and to add to the merriment by enticing fresh longs of course.\u00c2\u00a0 Volatility is profitable for trading, especially when you know the political outcomes and plans and in fact future statistics like the big players on the Street always do.\u00e2\u20ac\u009d<\/em><\/p>\n

Those are some of last week\u00e2\u20ac\u2122s comments technically speaking.\u00c2\u00a0 Our chart is color coded again and we\u00e2\u20ac\u2122ve left a little intact but our comments would be the same in many ways.\u00c2\u00a0 The double bottom is working it\u00e2\u20ac\u2122 magic and our oscillators in conjunction with the market action are not yet screaming \u00e2\u20ac\u0153SELL\u00e2\u20ac\u009d.\u00c2\u00a0 If this is indeed the blowoff phase that we\u00e2\u20ac\u2122ve kept an eye out for then we\u00e2\u20ac\u2122d expect to see about 5 to 6% tacked onto last week\u00e2\u20ac\u2122s index closing levels before the last buyer has bought.<\/p>\n","protected":false},"excerpt":{"rendered":"

\u00e2\u20ac\u0153The markets are enjoying a huge rally this morning\u00e2\u20ac\u00a6.\u00e2\u20ac\u009d That\u00e2\u20ac\u2122s how last week\u00e2\u20ac\u2122s Week Ahead began.\u00c2\u00a0 We really don\u00e2\u20ac\u2122t have to change a thing to make it fitting for this week.\u00c2\u00a0 May closed out in a very curious way last Friday.\u00c2\u00a0 Nearly 100 DOW points were tacked on in the closing minutes of that session.\u00c2\u00a0 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"class_list":["post-178","post","type-post","status-publish","format-standard","hentry","category-week-ahead"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts\/178","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=178"}],"version-history":[{"count":0,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=\/wp\/v2\/posts\/178\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=178"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=178"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.cheapiv.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=178"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}