Early Buying - Followed by Sellers

This morning saw buyers coming into the market, followed by increased selling. It would seem that we're going to spend a few hours under 1095 level - We'll see if buyers come back in the afternoon.

Charts That Have My Attention

The Russell 2000 seems to be struggling with the current rally.  There's much overhead resistance.  I'm watching this closely.  The Bulls seem to be relentless.  If markets are going to push higher, I would expect all indices to follow.

The Dow Transports - even with Buffets purchase of BNI have not punched through to new highs.  There are two levels that interest me with regard to financials.  First - Dark line - initial resistance.  Secondly, a penetration of the dark line and a test of the underside of the broken up channel.

China is a leader.  The Chinese market peaked, dropped hard and is now moving higher, seemingly breaking out again.  The US markets are making highs, yet China is significantly below prior highs.  I'm watching this.  I'm not sure why the Chinese markets are weaker than US.

The Chinese market bottomed 3 months prior to US bottom.  Has China already peaked.  If I was a bull, then I'd be watching this closely.

The Geman DAX , the EU leader is also struggling at making new highs.

 

The NASDAQ is a leader.  This is a chart of the cumulative number of advancing issues minus declining issues.  The SP is making new highs, yet this cum adv-decl issues is still below the 200d moving average.  Has the market reset and are we preparing for the next leg higher or have we turned over.

 Prior peaks in the NASDAQ Composite have been marked with peaks in the adv-decl issues breadth of market indicator.  Is this time different ? 

How Quickly We Forget...

I've been getting some comments lately from several readers, commenting on how the market looks "cheap" today.  It really amazes me how people can think that the market is cheap.  This what the world looked like on the evening of March 6 2009.  We had just witnessed one of the most dramatic selloffs of our lifetimes. - unless you witnessed the '30's.  That was March.  In nine months people have thrown all rationale out the window.  Most people have bought this rally hook line and sinker.  If you study fundamentals, then you can't honestly make a case for this market being cheap at these levels.  Who or what's going to drive it higher ?   The selling is going to come when you don't expect it.  Have you ever heard of buying the top ?  

This is where we are at today.  We've had a dramatic move from 666 to 1093.  Unemployment is running at 10.2%, closer to 17%.  We've changed all the rules to the game with regard to writeoffs - in essence - we've manufactured earnings for the financials.  We've dumped un-precedented stimulus into the system - Cash for Clunkers - TARP - Bailouts etc etc etc., Yet the market chugs higher.

Debt is higher than ever ( 11 Trillion in Debt) - and the economy is still weak....I don't care what the green shooters say.  The economy is in the royal tank.  States are close to going bankrupt and the Federal Government is technically bankrupt.  Soon we will need $100 to buy a loaf of bread.  If the rally continues and the markets move higher, you'll hear a "swishing" sound.  That sound will be the sound of the US Dollar going down the proverbial toilet bowl.

Here's the dollar.....do you think that the weak dollar has "sparked this rally ?   How low do you really think that the dollar can go before we start to feel the effects of inflation.  I don't trust the FED.  I don't trust the White House.  They all want you to put your assets at risk.  

This market rally has nothing to do with fundamentals.  It only has to do with stimulus.  The hope, of course, is that the economy ignites and is able to stand on its' own, before the inflation kicks in.  If the inflation becomes an issue before the economy improves,  then kiss the market rally good by and hope that the Fed can tame inflation with their stingy little .25% rate hikes over 5 years.

When they start to raise aggressively, the bond market will cave in too.

This market has nothing to do with fundamentals.  If you're a buy and hold guy, don't get too far from the screen, because when this dollar turns, it will be quick and ugly - they'll be some fear in the market.  We got a little taste of it last week......You saw those sell-offs.  3 days of up move erased in an hour or two.    I'll prefer to day trade and keep my powder dry until we get down to the 500-600 level.  I might think then about getting into equities again long term.

Bruce Springsteen - Great Song

Great Song  / Great Band - I was on the treadmill today and I happened to hear the lyrics to this song and it makes you think a little bit.  Bruce is great at making you contemplate things.  It's a story about Youngstown Ohio - One of the "former" steel capitals of the old world order.....how things change.

Song Lyrics

Powder Dry ? It's All Wet

You hear alot of talk about there's still lots of cash on the sidelines to continue to drive this rally higher......That's not what this chart from Gluskin and Sheff is saying.  In fact it looks like we're running out of powder.

Japanese Machine Tool Orders

There's an econ release today saying that Japanese machine tool orders are up month over month - that should be perceived as good news.  I went deeper and looked closer at the release and was amazed when I saw the orders and sales and compared those levels to several years ago.  You can see that orders are roughly 1/2 of what they were a year ago.

ES Thoughts Monday

Overnight was very strong the levels of interest from yesterday were: 

Sell 1066  Targets 1056/46

Sell 1071  Targets 1055/1063

Sell 1075.50  Targets 1063 / 1055

Buy 1047.50 Targets 1055/63

The overnight trade saw price move from 1066 to 1078 level +12 / Asian markets and other global markets were stronger.  It's a light economic release day.  Euro seems to be pushing 1.50, which has acted as resistance before.  1.4883 is a high volume area for the EURO

-23.6 Target on the move from 1039-1069.50 is the 1077 level. ; The 1084 highvolume node overhead could offer some resistance as well. ;  In 4 trading sessions the market has made a 50pt move off 1026 level to 1076.
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The market exploded higher -  blowing through all my levels.  It never looked back.  Today was a solid trend day.  The dollar was weak again today.  ES broke through the channel top and now appears to be headed for the underside of the trendline from the March lows.    1083/4 high volume levels really didn't offer much resistance as the market continued to punch through all overhead resistance.  All high volume nodes were broken. ;   Volume was not that high.  It was all done on relatively light volume.  I sold 1075.75 and was stopped out. for a 5 point loss.  I then tried again to short 1080.75 and was stopped on that as well.  -10pts on the day.  Ouch.

The market moved higher overnight and never looked back.  The buying was solid and continual all day. Veteran's day is a bank holiday on Wed.  I would imagine that trading will be light tomorrow also, prior to the holiday.  Markets are all on regular schedule, but banks are on holiday.  My guess is that this market will continue to push higher, with the bottom of the trend line offering the next point of possible resistance @ the 1120 level.  My trading will be very light over the next day or two.

The EURO moved higher basically 400+pips over the past 4/5 days.  It's coming to channel top.

 

Interesting Differences Between the Household and Establishment Surveys of Employment.

From the BLS website.  I found this interesting.   It seems that there's a big difference in unemployment, between the two surveys - Establishment and Household.  The BLS outlined the following differences between the two surveys.

The establishment survey includes people on paid leave - and also could double count, as employed, people that may be working two jobs.  Are you kidding me ?

This indicates to me that the U/E rate is closer to 17%

Rosenberg Comments / Friday

• It should not be lost on anyone that the S&P 500 has managed to rally over 60% from a low during which payrolls have declined 2.8 million, and that this is without precedent. Let’s define normal as the norm of prior 60% rallies and what’s normal is that by now the economy is not only standing on its own two feet but has already generated over two million net new jobs.
  
  
• And in October, even in the face of a dip in the labour force participation rate (which should be going in the opposite direction in a real recovery), the headline (U3) measure of the unemployment rate still managed to rise to 10.2% from 9.8% in September — the highest level since April 1983. But the labour market slack story does not end there — the broader U6 measure (which marginally attached workers and those working part-time for economic reasons) soared to an all-time high for the series, to 17.5% from 17.0% in September. In other words, more than one in six Americans are either unemployed or under-employed, despite the most dramatic monetary and fiscal efforts by a government anywhere to reverse a collapse in private sector credit.
  
  
• To say that the Household survey was horrible would be an understatement. This survey showed a net job destruction of 589,000, bringing the decline to 1.8 million over the past three months — more than what was lost in the entire 2001 tech-wreck-recession.
  
  
• President Obama is now running fiscal deficits that would have made FDR blush.

Source - David Rosenberg, Gluskin Sheff

Thinkscript - MeasuredMovesScript

Here's a script that some of you might enjoy.  It is a series of measure moves.  It takes the high and the low of the session or whatever aggregation period you're using and divides the screen into 14 equal parts, based on the size of the difference between the high and the low.  I set it up this way so that you don't have to keep adjusting amount of space between the lines when you switch time frames.

Here's the link to the code.

I also added in a white line (midpoint of high and low)  and two red lines - +5/-5 divisions away from the midpoint.  I just felt that it provided better perspective.  Let me know if you like it or what changes you might like to see to the thought.