Sunday, November 24, 2013

Sornette or Bayonet

Some weeks back I reposted work by Sornette regarding the fractal expression of a bubble.  Apparently Fed economists can't see them but mathematicians, and just about everyone else can.  This market is following this expression to a tee.  Their work looked at two possibilities, 1850 by mid November or 2200 by mid January.

There is a case for both, and it just depends on the powers driving this market are hoping for. The taper drumbeat, deflation breaking out, political animosity, employment stalling, may give these investors an incentive to try to get what they can, as fast as they can.  But Friday Vix has nearly hit multi-year support/lows, the dollar failed to breakout, oil nearly broke out, natural gas is breaking out, and SPY crashed the BB bands to the high side.  Next week is a slow week, so not sure what if anything will happen.

But the following weeks get very interesting.  My view is with the lying and uproar over ObamaCare, and the move by Reid to end filibusters, the next budget meetings are not going to be fun.  If the Republicans grow a pair, and can actually articulate what they believe, this battle and 2014 is going to be a rocky year politically. Naming Christie the President of the Republican Governors Association is a tell that the GOP wants to win, and push forward someone who can turn a phrase and blunt rhetoric.

I think we squeeze higher the next few days and and December is a disaster.  High beta is already faltering, and banks are extremely stretched over their 200 MA, some of them are 40% over.  For me I am long oil, long vix, long gold, and long miners.  Enjoy the charts and turkey Day.

PS, the Iranian deal maybe short term positive for the market and negative for oil.

Sunday, November 17, 2013

I Am in Awe of the Fed

Wow, the train rolls on.  Based on the now widely known correlation between the Feds balance sheet and the broad market, the slope suggests a 1/2% rise in the market every week until the market decides that amount of stimulus the Fed will inject changes.

Based on the Yellen's testimony we can deduce with some degree of confidence that December is off the table, and seeing the deflation taking hold in Europe, and always in Japan, we can expect the 85 Billion is the low number for at least the next six months.

That now moves my number over 2000 for SPY in the next six months with at least a 5% correction to reset the channel and to re energize the VIX to allow vol selling to drive the low volume pumps.  The obvious catalyst is the budget showdown in mid January.  The Republicans are now in a much stronger position now that Obamacare is showing the American people what it really does, and most don't like it.  so I expect some incredible end of the world rhetoric that will drive Vix and push on the market.

I think this should manifest itself no later than the second week of December, and we will see it in XIV.  XIV is optimizing at thirty days in the future and any weakness will tell us that people are starting to protect themselve from this fight.  also by that time the Vix will be at all time lows again, meaning no more blood in that rock to short it.

In the meantime, we are coming up on Thanksgiving week which is normally bullish, and the commodities are resisting going down, so we may have a three week commodity buy area, and I have buys on JO, UGAZ, precious metals, and miners.  I am also watching oil as we had a sharp reversal on Thursday.  Below are my charts and further explanations.  Enjoy.

Sunday, November 10, 2013

Call me Sybil

Last week went pretty much as I expected except Thursday was pushed further down than I thought, and Friday's surge has me rethinking next week.  It could still be a volatility play caused by the market makers trying to settle their books after a one way move higher last month, or the ECB move can be interpreted as a currency war initiation vs a move to stave off deflation.  The strength in miners, materials, drillers, and banks has me thinking maybe it is the former.

A strong dollar and higher commodity costs are good for the above sectors, and these input costs punishes the emerging markets which is good for EDZ (Which I bought last week).  Now waiting to see if gold and silver signal if there is more to this move from an inflation standpoint

I am am very profitably out of all but one (TQQQ) of my triple long puts, thanks to the Thursday, and Friday morning weakness, and I am still scaling in and out of NUGT (still underwater).  The reversal in NUGT, and the juniors surprised and heartened me.  I hold PPP and NUGT, and am going to watch ANV, SLW, and AG next week if this move looks promising, and my signal flash buy.

What else looks good is POT, KOG, and SGY.  Let's see what Monday brings

Sunday, November 3, 2013

Calm Before The Storm

Two weeks ago I posted on do we blow up or off. We got a little pop and then some selling, but now the market is digesting what is next, and judging from the Fed's comments and the bond and commodity markets it doesn't look promising.

But knowing the market, I think they will try to push the broad market up to test the Fed week highs before succumbing to the market makers during OPEX week.  Looking at the chart below, the triples have been embedded, but are now cracking, and the the broad market is finally showing signs of fatigue.  I am holding TQQQ puts, SDS, and TWM.

It also appears that the volatility index is resisting falling further, but no one is bidding up protection in a meaningful way yet.  A calm Vix means we may still get UVXY puts and XIV to continue to work for us. Still holding UVXY puts, and closed my XIV Friday, but will buy back on my signal.

The metals and miners have whip sawed a bit, but if the RSI moves back into the upper channel, I think we move higher in both next week.  I am building a position in NUGT, and will scale in and out as necessary to achieve my 10% gain in invested capital by the end of November.

Energy; had my best trades shorting oil, and I closed my UCO puts for now.  Still holding GASL November puts. OIH and UGAZ are telling me this party in natural gas is over for a bit, and longer term energy looks like it is in trouble (oil and nat gas).