Bill Cara’s Blog for Feb 8, 2012
CTA Trading Desk Morning Report
[9:00am ET] Good morning, Geoff here.
Action in gold yesterday was positive. As it often does, it found support on a major fibonacci retracement, in this case the 50% retracement. This move came as Ben Bernanke spoke before the Senate. As long as there are issues, he has proven that he will print, print, print and both stocks and commodities like liquidity.
The worry is that we will not know when Big Ben’s printing press strategy has gone too far until after inflation takes hold. In other words, price inflation gets ugly long after the money is injected into the system and once that train starts to move down the tracks, it is difficult to stop. That is called hyperinflation and hopefully is not what gold and equities have been sniffing out with their current rally.
Traders that are not worried about the end of the world continue to buy dips and the market is looking for any reason to rally. If good news is released about the economy – the market rallies. If bad news is released about the economy – the market rallies because traders know that further QE is in the cards. When will this current “risk-on” period end?
There are various ways to measure “risk on”, but one of the most intuitive is the ratio between the Nasdaq Composite to the Dow Jones Industrial Average. If traders are looking for beta, Nasdaq stocks are bought (and the ratio rises) and conversely, if they are looking for safety they are buying Dow stocks (and the ratio falls). If you want to view this yourself you can do so by entering $COMPQ:$INDU into stockcharts.com. You can see that we are in a “risk on” period and the ratio is as overbought as it has been in the last 3 years. Although it is not a great timing tool because bullish sentiment can run for longer than shorts can remain solvent, the ratio at these levels has been a key warning sign for a stock market decline.
So; we remain cautiously bullish having added a few Cara 100 longs yesterday (with GTC sell-stops entered immediately upon execution).
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|
||41.10 (1.85%)||Components, Chart, More|
||2.17 (0.09%)||Components, Chart, More|
||16.37 (0.48%)||Components, Chart, More|
||40.86 (0.60%)||Components, Chart, More|
||3.27 (1.01%)||Components, Chart, More|
|^OSEAX||OSE All Share||467.75
||5.22 (1.13%)||Components, Chart, More|
||2.46 (0.73%)||Components, Chart, More|
||25.24 (0.41%)||Components, Chart, More|
||10.11 (0.17%)||Components, Chart, More|
||20.40 (2.04%)||Chart, More|
||2.65 (0.30%)||Components, Chart, More|
||4.57 (0.29%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||812.76
||10.55 (1.32%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara on Trends & Cycles
Vad’s Catch of the Day
Kaimu’s Sound Money
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report