Bill Cara’s Blog for Dec 19, 2012

CTA Trading Desk Morning Report

[7:00am ET] Good morning, Geoff here.

Yesterday, the US Dollar broke the support shown in the posted chart:

ggimage09_121912.png

This led to a rally in the S&P:

ggimage02_121912.png

I first posted that chart a few weeks ago. My opinion was that price was going to rally up to the Question Mark by sometime in January. You can see that price is cooperating, but you can also see a bearish rising wedge pattern playing out. Should price rally up to the point marked, price oscillators will be overbought and we could see a decline from there. Of course, that is all speculation at this point but with the US Dollar unable to find support, the chart is still in play.

You can see the strength in the market in this chart:

ggimage04_121912.png

Should this analysis be correct, I expect that the following Stock/Bond Ratio chart to be overbought and telling us to sell stocks and buy bonds when we reach the Question Mark in the chart above.

ggimage01_121912.gif

But, in short-term overbought conditions, there is reason to be looking for a dip before moving higher:

ggimage03_121912.png

Warning sign:

ggimage05_121912.png

However, we are entering a strong period of time for the market so price may remain overbought so take action based on your timeframe.

Let’s move on to what most of you are most likely interested in, Gold:

ggimage07_121912.png

Yesterday, I mentioned that something was amiss in the price action in the gold space and sure enough, that continued throughout the day.

The US Dollar broke support which should have launched gold and the miners higher but they were sold off in a major “pukefest” as we used to call it in the pits.

ggimage07_121912.png

However, GDX didn’t break below the Daily Cycle Low so that long trade is still in play:

ggimage08_121912.png

Yes, I am disappointed that gold didn’t do what it was “supposed to do”, as it simply continued to correlate WITH the dollar as money flowed out of safety and into stocks but it is what it is.

The COT report will be interesting to see this weekend. The high level of Speculative Longs should have dropped this week, hopefully enough to allow price to rise. I will say that short interest in many miners dropped yesterday as the shorts took advantage of the decline in the metal to get out of the trade, and a nice trade it was.

Have a great trading day!


Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 2,430.92 6:45AM EST Up 26.24 (1.09%) Components, Chart, More
^BFX BEL-20 2,503.30 6:43AM EST Up 22.50 (0.91%) Components, Chart, More
^FCHI CAC 40 3,662.87 6:59AM EST Up 14.24 (0.39%) Components, Chart, More
^GDAXI DAX 7,668.21 6:45AM EST Up 14.63 (0.19%) Components, Chart, More
AEX.AS AEX General 345.23 6:44AM EST Up 1.63 (0.47%) Components, Chart, More
^OSEAX OSE All Share 496.53 6:45AM EST Up 5.04 (1.03%) Components, Chart, More
^OMXSPI Stockholm General 343.95 6:59AM EST Down 0.23 (0.07%) Components, Chart, More
^SSMI Swiss Market 6,963.24 6:45AM EST Up 51.15 (0.74%) Components, Chart, More
^FTSE FTSE 100 5,966.86 6:45AM EST Up 30.96 (0.52%) Components, Chart, More
FPXAA.PR PX Index 1,040.83 6:59AM EST Up 9.82 (0.95%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,481.02 8:00AM EST Down 2.75 (0.19%) Chart, More
GD.AT Athex Composite Share Price Index 859.69 6:45AM EST Up 21.61 (2.58%) Chart, More

http://finviz.com/futures.ashx

http://finviz.com/fut_chart.ashx?p=m5&t=ES

http://finviz.com/fut_chart.ashx?p=m5&t=ZB

http://finviz.com/fut_chart.ashx?p=m5&t=DX

http://finviz.com/fut_chart.ashx?p=m5&t=GC

http://finviz.com/fut_chart.ashx?p=m5&t=SI

http://finviz.com/fut_chart.ashx?p=m5&t=CL

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.

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Point and Figure on Canada


OptionOracle


Harp’s Roadmap


Cara on the Metalminers


Cara on the International Markets


CTA Trading Desk Mid-Day Report


CTA Trading Desk Post-Close Report


  1. 7:00 AM ET MBA Purchase Applications 8:30 AM ET Housing... [#116183]
    By: davefairtex (5215 comments) Go to top ↑
    • 7:00 AM ET MBA Purchase Applications
    • 8:30 AM ET Housing Starts
    • 10:30 AM ET EIA Petroleum Status Report
    • 1:00 PM ET 7-Yr Note Auction
  2. 1 in Buy alert 1 in Distribution Zone 2 in Sell... [#116184]
    By: davefairtex (5215 comments) Go to top ↑
    • 1 in Buy alert
    • 1 in Distribution Zone
    • 2 in Sell alert

    Accumulation Zone (2%): Monthly 2, Weekly 4, Daily 1
    Distribution Zone (27%): Monthly 8, Weekly 29, Daily 45

  3. ... [#116186]
    By: worthcap (152 comments) Go to top ↑
  4. This morning I went double down on VelocityShares 3x Long... [#116187]
    By: California Kid (278 comments) Go to top ↑

    This morning I went double down on VelocityShares 3x Long Silver USLV. I am using my margin for the first time in 3 years. I expect some shares to come into my account in the next few days I can cash out and can sell later my 40′s at a tax loss and not claim I purchaced a similar stock to show the loss as I will be only selling some.

    Not advice just my trade posted here as allway.

    • Not sure why you wanna double down here CK. I played the... [#116204]
      By: Les (7233 comments) Go to top ↑

      Not sure why you wanna double down here CK. I played the same game in August 2011 and destroyed 40% YTD profits in 3 trading session.

      Was playing around with Geoff’s Christmas gift in my inbox by attempting to produce an $SPX weekly chart with cyclical annotations. It is as attached and a first effort. If anyone’s had a go, I’d like to see it.

      In comparing the index to its leveraged counterpart SPXL I noticed something important. Since the end of 2011 no advantage has been gained by leverage. Look at the overlay. SPXL ceased to be an advantage since the major topping action a year ago.

      It could be something inherent in the ETF – perhaps its performance decays with time like most of this ETF trash. But if this is not the case, then it suggests a second possibility – big money has ceased leveraging. Perhaps someone could show a chart of HF’s and HB&B leverage for the last couple of years and we could verify.

      Let’s look at SLV compared to USLV and we can see the same issue. This leveraged ETF ceased outperforming SLV six months ago. Again, I suspect that Hedgies and HB&B are playing a cautious note with Washington and Europe on the agenda, and they’ve been positioned like so for some time now.

      I had the choice of holding physical and hedging at 35 resistance earlier or getting out and continue my deleveraging. I chose the latter. Unless you are arguably a sophisticated investor with the means of hedging your position you should be prepared for disappointment.

      I listen to Bill and Geoff but also one or two other trader/analysts. And one model I noted from Armstrong gave Feb/Mar as rock n roll time, as the chit hits the fan in Europe. I took that model as an opportunity to get my tax affairs in order before resuming a position.

      Given Washington shananigans coming up for New Years – Republicans are likely to stonewall on negotiations so that they can produce a tax ‘victory’ later – which will likely be taken advantage of by Wall Street in order to shake loose some positions. I see no reason to establish a position here.

      JMO and likely to change at a moment’s notice

  5. ... [#116190]
    By: Bull Hunter (3552 comments) Go to top ↑
  6. 16:50 $ 33.99 5,749,998 I was reviewing my positions... [#116191]
    By: California Kid (278 comments) Go to top ↑

    16:50 $ 33.99 5,749,998

    I was reviewing my positions thismorning when this number stood out for Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX). In an enviroment of several hundred shares at a trade time nearly six million shares crossed in one deal. Might just be window dressing for a fund but it could signal someone knows somthing. Why after hours?

  7. BA - added to Priority Stock List at Wells. Company can... [#116192]
    By: Bull Hunter (3552 comments) Go to top ↑

    BA – added to Priority Stock List at Wells. Company can return significant capital to shareholders over the next few years.

    BIDU – Maxim Initiates with a Sell. Target = $80

    ORCL – numbers raised at Jefferies. Shares of ORCL now seen reaching $35. Estimates also raised on quarter beat. Hold rating.

    ORCL – Oracle numbers raised at Oppenheimer. Shares of ORCL now seen reaching $37. Estimates also raised on positive quarterly results. Outperform rating.

    ORCL – Oracle price target raised at Lazard. ORCL price target raised to $41. Solid F2Q13 results that beat expectations. Buy rating.

  8. I will never own another mining stock as long as I... [#116193]
    By: cheapy (578 comments) Go to top ↑

    I will never own another mining stock as long as I live!!!!

    What totally worthless trash!

    • Agree. House of... [#116195]
      By: c3wands (72 comments) Go to top ↑

      Agree. House of Pain!

    • Cheapy, sorry to read about your pain. If you would have... [#116197]
      By: Bear E (287 comments) Go to top ↑

      Cheapy, sorry to read about your pain.
      If you would have bought physical gold instead of mining stocks would you have had a gain or loss?
      Bear E

      • Ok, I feel all your pain but...I couldn't... [#116198]
        By: davefairtex (5215 comments) Go to top ↑

        Ok, I feel all your pain but…I couldn’t resist.

        Crucifixion? Good!

        http://www.youtube.com/watch?v=arwZcw0Ejcc

      • I was already 50% metal. No, I won't ever consider buying... [#116202]
        By: cheapy (578 comments) Go to top ↑

        I was already 50% metal.

        No, I won’t ever consider buying metal again, either.

        No place to hide except wherever the Fed wants you to be at any given hour.

        PS: and CANADA is no “safe” jurisdiction. That was my BIG mistake.

        • Just remember how difficult and expensive it is to pull... [#116205]
          By: westcoaster (1130 comments) Go to top ↑

          Just remember how difficult and expensive it is to pull minerals out of dirt and rock. We’re ever teetering on the edge of deflation in an “interventionist/non-market wonderland”. What the big boys want is what we all will get. They want their assets up in price. Heroin will continue to be supplied to the patient, so don’t expect spry efforts in that direction, but rather follow the money. It’s going into keeping up with growth in mobile connectivity. Real capitalizm flourishes here. Money is going into anything that can produce free cash flow, and the pressure is being applied to have that free cash distributed, not reinvested in growth and hiring. Boomers need and want income, and the Bernank has taken away the easy option.

  9. Same thinking as posted above for GLD. For those who do not... [#116194]
    By: worthcap (152 comments) Go to top ↑

    Same thinking as posted above for GLD. For those who do not read GSD http://www.caseyresearch.com/gsd/home , very informative and entertaining. ES points out that there are still 482 open silver contracts for Dec delivery, holding off any PSLV buying until the boys take silver lower as they cover their delivery requirements. As I pointed out a few days ago in a prior Friday post, silver looks stronger than gold on the weekly charts.

  10. Finally joined the site. I would love to add charts to my... [#116196]
    By: Patrick (1 comments) Go to top ↑

    Finally joined the site. I would love to add charts to my comments but not sure how to do it. If somebody could please comment on the process it would be greatly appreciated.

  11. ... [#116199]
    By: Grym (5469 comments) Go to top ↑
  12. very heavy buying again, three days in a row: Dec 22, 2012... [#116200]
    By: worthcap (152 comments) Go to top ↑

    very heavy buying again, three days in a row:
    Dec 22, 2012 – 31 strike, 5793 contracts
    - 29.50 strike, 1421 contracts
    - 29 strike, 1204 contracts
    - 31 strike, 1500 contracts
    Jan 19, 2013 – 31.50 strike, 5168 contracts

    other strikes and weeklies are unremarkable between this Friday and Jan 19
    call action is unremarkable, seems limited to this Friday 30, 30.50 and 31 strikes, 1932, 1941, 1292 contracts respectively
    but note the following Jan 19 call action:
    - 30.50 strike, 6239 contracts
    - 31 strike, 2116 contracts

    • compare this with numbers from 11 am: Dec 22, 2012 - 30... [#116206]
      By: worthcap (152 comments) Go to top ↑

      compare this with numbers from 11 am:
      Dec 22, 2012 – 30 strike, 12,488 contracts
      - 29.50 strike, 3008 contracts
      - 29 strike, 1487 contracts
      - 31 strike, 1856 contracts
      - 27.50 strike, 498
      Dec 29, 2012 – 30 strike, 10,005 contracts (no typo)
      - 29.50 strike, 1936 contracts
      Jan 19, 2013 – 30.50 strike, 5405 contracts
      - 30 strike, 3201

  13. I can't help but recall one of the gurus saying the best... [#116208]
    By: mikede (121 comments) Go to top ↑

    I can’t help but recall one of the gurus saying the best time to have bought gold or gold shares
    Was the year hardly anyone showed up at Pdac

  14. ... [#116209]
    By: Les (7233 comments) Go to top ↑

    http://www.spiegel.de/international/europe/electio

    Berlusconi wants back into power, following Monti’s notice of resignation. Such an election is likely around February. Pulling no punches this time as a populist. German elections follows 6 months later. One to watch.

  15. I'm seeing a big divergence between ^RUT and ^SPX today on... [#116210]
    By: BillySundance (1355 comments) Go to top ↑

    I’m seeing a big divergence between ^RUT and ^SPX today on the daily. A little small cap breakout in progress:

    http://stockcharts.com/h-sc/ui?s=$RUT:$SPX&p=D&b=5&g=0&id=p38476142322

    Also, on the weekly chart, it’s looking more and more as if we’ve completed a long consolidation in the small caps that began in July/Aug 2011 when small caps peaked versus large caps:

    http://stockcharts.com/h-sc/ui?s=$RUT:$SPX&p=W&b=5&g=0&id=p99225315646

  16. What I am seeing in the solar stocks right now kind of... [#116211]
    By: BillySundance (1355 comments) Go to top ↑

    What I am seeing in the solar stocks right now kind of reminds me of where the homebuilders were 1-2 years ago. You can buy the whole global solar industry for a few billion dollars at this point.

    Nice pop in the Solar ETF today:

    Guggenheim Solar (TAN)-NYSE
    17.50 0.80(4.79%) 2:45PM EST – Nasdaq Real Time Price

    I am thinking of allocating a few % of the port and just buying a handful of players with the more manageable balance sheets. Enough that if I am wrong, I can live with losing all, but if I am right, could see a 2-3% position become an 8-10% piece. I don’t think a solar revival is on the immediate horizon but much like the homebuilders, there is a chance we may see rock bottom in the stock prices long before data begins to indicate improvement in the solar industry. Downside has been substantially reduced.

  17. see attached. screen shot as the link is for members... [#116212]
    By: Les (7233 comments) Go to top ↑

    see attached. screen shot as the link is for members only.

  18. Off topic but nice video - http://youtu.be/70Ikj1hZDnw GLD... [#116213]
    By: ea32da32 (2362 comments) Go to top ↑

    Off topic but nice video – http://youtu.be/70Ikj1hZDnw

    GLD – I’m neutral on the price of gold and had to zoom out and look at the larger picture. I did dip in a little today and pick up a few March calls. I’ve included a weekly chart and it shows exactly what’s going on – gold is consolidating in a range – if you compare the same time frame with SPY it’s not that much different. And then again, it’s all about supply and demand. I don’t know how public sales of gold is going – Evidently there is more SUPPLY THAN DEMAND at the MOMENT.

    GDX – this one is pretty easy for me – I won’t go long until this cycle bottom is in. I’ve also included a simple weekly chart that says it all for me – I do believe we’re very close to a cycle bottom, maybe the $42 area, maybe right here.

    I’ve not been trading much lately, the market lacks true trend with ’cause’, this fiscal cliff garbage , the terrible shooting, pitting people against people, personal attacks in politics, dealing with forgettable people that want to argue… – it’s Christmas time and I’m tuning out… for the most part.

    Merry Christmas everyone. God Bless you all.

    Earl

  19. I came across this essay posted on another blog. Really... [#116214]
    By: BillySundance (1355 comments) Go to top ↑

    I came across this essay posted on another blog. Really excellent stuff if you are interested in behavioral finance (which I think is something you should be interested in if you want to be a great investor!). Lots of discussion of investment theory and reference to Buffet and other great investors.

  20. As i go thru the yrs of pain in this sector, I learn rules... [#116215]
    By: tbar (303 comments) Go to top ↑

    As i go thru the yrs of pain in this sector, I learn rules, sometimes twice or so admittedly. Like this one “beware of Us election yrs with pm stocks”
    This is a corelation that could not be more aparent imho.

  21. Monetary policy makers voting 8-1 against more quantitive... [#116216]
    By: BOB 47 (361 comments) Go to top ↑

    Monetary policy makers voting 8-1 against more quantitive easing this month . November inflation yesterday came in stubbornly at the same level . Neville Hill of Credit Suisse said, ‘ Perhaps the only interesting point is that they seem unhappy with the level of [ the pound ] at the moment , saying that the lack of competitiveness in the last couple of years was a headwind to UK exporters ‘ . This combined with the central banks dumping gold and silver on Tuesday at noon , should keep the price of gold and silver in their ” proper place ” , for the next couple of days .

    http://tinyurl.com/cncf7p5

  22. https://www.youtube.com/embed/dYslhL71k1M?rel=0 (1 minute... [#116217]
    By: jock (1011 comments) Go to top ↑
  23. ... [#116218]
    By: loannetter (1298 comments) Go to top ↑
    • The real estate market turned positive 10 months ago... [#116219]
      By: Ilya (572 comments) Go to top ↑

      The real estate market turned positive 10 months ago. Granted it ain’t a barn burner yet but real inventory levels plus positive demographics coupled with absurdly manipulated low interest rates suggest that lumber futures do not lie.

      Housing has now gone back to ‘local.’ There continue to be pockets of distress but, dare I use North Texas as an example, the commodity ‘stick’ builders are building for spec….and they are selling! Ryland, Centex and even Toll Bros. are seeing traffic that they haven’t experienced since 08.

      What is driving this market? Well, nasty increases in rents. A collegue of my son is in need of a 6 month rental. The best his company can do for a one bdrm appartment in a decent neighborhood is $1,400/mo.

      Hang in there Loangirl. The tide is turning. There ain’t no next shoe to drop but maybe you might need to relocate to a naturally fanned hotter market.

      I have a Conference Board study from 1967 titled ‘Mortgage Debt for Non Real Estate Purposes.’ In retrospect it is a quaint telling of times past where the FHA VA etc would not finance anything but hardwood floors but would not finance central air, appliances and well any ‘add ons’ that would need to be replaced within the 30 year mortgage. Their theory was that incomes and the purchasing value of the dollar would remain static for the life of the mortgage… What a hoot!!! At least they were honest to the political rhetoric of those times…

      Well, I’m off to cash my ‘entitlement’ check which has been debased in purchasing power since the Boskin Commission and will be further reduced with the chain weighted CPI since I can easily fulfill my protein requirements by eating my cat’s food. And to think that I am an ‘Entitled’ person since I have paid dearly into that corrupt system since 1959.