Bill Cara’s Blog for Jan 8, 2013
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
Last evening in Miami the American college football championship game was played. The #2 ranked team Alabama beat the #1 ranked team Notre Dame for their third national championship in four years. The score ended 42-14. Alabama was leading 35-0 before they let up late in the third quarter.
Let this be a lesson to you all.
Before the game started last evening, Pat asked me who I thought was going to win. My reply was unequivocal: “Not the Pope, nor all the priests and nuns in America, nor Rudy, will be able to help poor Notre Dame. They are going to get smashed.”
Alabama is a winning machine. When I have the time for TV, I watch, as some of you may know, only two teams: Alabama and LSU, and a year ago those two played for the national championship. I’m keen to see the best.
But America loves its stories. I think you know what I mean so I’ll leave it there, except to say that Alabama this year crushed a couple teams that would have beaten Notre Dame by 10 points or more. The latter should not have been ranked #1, but the storyline played well in the dreams of many.
For those who bet money on such things, this game was the biggest set-up of the year.
Now, having said all that, I will be doing all I can to get Caitlin enrolled at Notre Dame in 15 years. I want for her the best education possible.
Have a great day.
Good morning, Geoff here.
The stock market appears to be working off its short-term overbought condition by consolidating at a high level.
Yesterday, I posted a number of charts but I’d like to review a particular one this morning – the Weekly Techie.
I first posted the target chart on November 26th for the week ending November 23rd which happened to be Black Friday – the day after Thanksgiving and the traditional start of the Christmas shopping season. Here is the original chart along with the Wall Street Allocation chart that I posted on November 23rd:
Wall Street Allocation (courtesy of sentimentrader.com):
At that time, the Four Pillars Solution was on BUY and I was thinking that Washington would get its act together before the end of the year so it was time to fade the fear driven news cycle and buy stocks. As you can see, Wall Street Strategists had the lowest allocation to stocks in the 15 years shown, so it made sense that the extremely low allocation that Wall Street Strategists had at the time would grow, pushing stocks to either the recent highs or the top of the triangle by mid January.
We are approaching mid January so here is the updated chart:
This is where it gets tricky. The November low was much easier to trade because we bought stocks and simply set sell-stops at clearly defined levels which fortunately were not needed. Now, the Weekly Techie chart is approaching a sell area but Time Cycles are saying that stocks could run much higher so we have to be aware of that. Tops are more difficult to trade than bottoms because they end up being a process not an event. Shorts start to build and then get squeezed which pulls the market higher and if Wall Street Strategists start to recommend higher levels of stocks, the market can move much higher.
What we may see is; the market moves to new highs, talking heads talk about it, retail traders buy more stocks, Wall Street Strategists recommend a higher stock allocation and we start to hear the statement; “the market can stay irrational longer than you can stay solvent” as shorts complain about the fundamentals not supporting the market.
So, as we have been saying for weeks; global QE will drive risk assets higher so stay long and buy the dips as long as the trend remains up. But, don’t get too caught up thinking that the run will never end because eventually it will.
I will leave you with one last item from sentimentrader.com. Look at how many sectors are too bullish right now. All the sectors may get to that point, even Gold Stocks which haven’t caught on yet but that should make you cautious.
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|
||1.23 (0.05%)||Components, Chart, More|
||13.70 (0.55%)||Components, Chart, More|
||24.67 (0.67%)||Components, Chart, More|
||16.16 (0.21%)||Components, Chart, More|
||0.06 (0.02%)||Components, Chart, More|
|^OSEAX||OSE All Share||503.75
||1.93 (0.38%)||Components, Chart, More|
||0.53 (0.15%)||Components, Chart, More|
||24.13 (0.34%)||Components, Chart, More|
||14.50 (0.24%)||Components, Chart, More|
||4.09 (0.39%)||Chart, More|
||39.45 (2.67%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||984.23
||14.80 (1.53%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
To learn how to trade stocks using the proven trading system discussed in today’s technical trading commentary, check out our comprehensive online trading course. On that page, you can view an entire, 45-minute class module on “Buy Setups,” which gives you an idea of the quality of the material. You won’t be disappointed.
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Cara on the Metalminers
Cara on the International Markets
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report