Bill Cara’s Blog for Jun 20, 2012

CTA Trading Desk Morning Report

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

The Fed announcement will be released today and the debate is whether or not there will be QE3.

The recent rally has many wondering if Big Ben will pull the QE arrow out of his quiver or wait until it is needed.

As you know, we have been positive on the stock market for a number of weeks now, but it has gotten to overbought levels as shorts have been squeezed out of their positions by traders anticipating liquidity pumping by global central bankers.

Yesterday I showed you the following chart with the anticipation that it would reach the “Sell Zone”, which it has. Sure, markets move higher from overbought levels, but since we have been long for weeks, I would describe the initiation of positions at these levels as “risky”.

[inline:ggimage01_062012.png]

The only difference between the following chart and the one posted yesterday is the note in red regarding the MACD histogram. Watch the histogram for bar height shrinkage for that will be a sign of declining momentum. Also; do you see how yesterday’s high was on the fib retracement? If you don’t use fibonacci in your trading, please start.

[inline:ggimage02_062012.png]

I also showed you the following chart focusing on the moving average indicator that shows trend direction. It is great for catching the meat of the move in a trending market (but does not help in a chopping market). I have a number of charts that perform that same basic function. I want to note that quite often, when these charts look to be crossing into a new trend, EXACTLY at that time, the market reverses. In this news centric trading period anything can happen, but I would not be surprised to see the market decline right as this indicator’s “buy” signal is triggered – I have seen it happen before and I expect to see it happen many times again.

[inline:ggimage03_062012.png]

The following chart anticipated the recent low perfectly. The Red Arrow has been in place for many weeks – will it call this move lower?

[inline:ggimage04_062012.png]

I have not discussed gold in a while. Our intermediate to long term position is extremely bullish based on fundamentals. In the short term, please note the recent volatility squeeze. Often times, the initial move is a head fake, but I anticipate a large move once it is established – either way, so be prepared.

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 1,964.85 6:44AM EDT Up 11.85 (0.61%) Components, Chart, More
^BFX BEL-20 2,141.50 4:32AM EDT Down 9.50 (0.44%) Components, Chart, More
^FCHI CAC 40 3,110.69 6:59AM EDT Down 7.23 (0.23%) Components, Chart, More
^GDAXI DAX 6,372.81 6:44AM EDT Up 9.45 (0.15%) Components, Chart, More
^AEX AEX General Chart, More
^OSEAX OSE All Share 450.23 6:44AM EDT Up 1.52 (0.34%) Components, Chart, More
^OMXSPI Stockholm General 312.99 6:58AM EDT Up 2.00 (0.64%) Components, Chart, More
^SSMI Swiss Market 6,001.33 6:44AM EDT Down 32.80 (0.54%) Components, Chart, More
^FTSE FTSE 100 5,604.07 6:45AM EDT Up 17.76 (0.32%) Components, Chart, More
FPXAA.PR PX Index 894.60 6:59AM EDT Down 5.50 (0.61%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,382.08 6:44AM EDT Down 9.37 (0.67%) Chart, More
GD.AT Athex Composite Share Price Index 607.67 6:44AM EDT Up 7.60 (1.27%) 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.


Vad’s Catch of the Day


Kaimu’s Sound Money


Deron’s Daily ETF Analysis

This daily column is obviously focused on bringing to your attention specific technical-based setups for swing trading of ETFs. However, because many people actually trade the broad-based ETFs such as $SPY, $QQQ, $IWM, or $DIA, we typically do analysis once a week just on the main stock market indexes, which can translate into actionable ETF setups as well.

Although we now have a new “buy” signal in place with our market timing model, each of the main stock market indexes must now contend with key resistance of their 50-day moving averages (50-day MA). This suggests that stocks may either pullback from or consolidate at current levels over the next several sessions. As such, let’s take a look at the current technical support and resistance levels for two popular benchmark indexes, the Nasdaq Composite ($COMPQ) and S&P 500 Index ($SPX).

On a burst of volume, the Nasdaq closed above its 50-day MA yesterday, so this prior level of resistance should now offer new support. One of the most basic tenets of technical analysis is that a prior level of resistance becomes the new level of support after the resistance is broken (and vice versa). Nevertheless, it is not unusual for a stock, index or ETF to pull back from its first attempt to crack through a major moving average following a significant move lower.

If the Nasdaq holds above its 50-day MA, its next significant resistance level is near the 2,980 area. If the index eventually retraces from its current level, it will probably first retest and find resistance at yesterday’s high before moving lower. Above this mark, the Nasdaq has significant overhead resistance near 2,980 and 3,085. Yesterday’s (June 19) intraday low, the 20-day exponential moving average (20-day EMA), and the 200-day moving average (200-day MA) should all act as important support levels for the Nasdaq. Using supplemental Fibonacci retracement levels, the daily chart of the Nasdaq Composite below clearly summarizes all this:

IBB

The S&P 500 Index also surged above its 50-day MA yesterday, and on higher volume. Yesterday’s high (1,363), as well as the 1,380 and 1,420 levels all present near to intermediate-term resistance levels for the S&P. As with the Nasdaq, the 50-day, 20-day and 200-day moving averages are significant support levels on the S&P 500:

IBB

With the stock market in “buy” mode, we will be focusing most of our attention on identifying potential ETF and stock setups to buy during market pull backs. It would now take several significant “distribution days” (higher volume selling) to nullify recent bullish price action on the long side of the market. However, keep in mind that the first move higher following a substantial market correction does not generally yield stellar results because new leadership in the stock market is just becoming established. Most important is that we continue to see institutional accumulation during pullbacks, and as the stock market works its way higher.

The commentary above is an excerpt from The Wagner Daily newsletter, which we have been publishing since 2002. Subscribers to the full version receive our exact entry and exit prices for swing trades of the top ETF and stock picks, access to our market timing model, and more. To get started today, sign up for your 30-day risk-free trial to our Wagner Daily stock newsletter or visit our trading blog to learn more about our proven technical trading strategy.


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 10:30 AM ET EIA... [#110364]
    By: davefairtex (5215 comments) Go to top ↑
    • 7:00 AM ET MBA Purchase Applications
    • 10:30 AM ET EIA Petroleum Status Report
    • 2:00 PM ET FOMC Forecasts
    • 2:15 PM ET Chairman Press Conference
  2. 3 in Buy alert 2 in Distribution Zone 1 in Sell... [#110365]
    By: davefairtex (5215 comments) Go to top ↑
    • 3 in Buy alert
    • 2 in Distribution Zone
    • 1 in Sell alert

    Accumulation Zone (3%): Monthly 6, Weekly 4, Daily 1
    Distribution Zone (17%): Monthly 9, Weekly 6, Daily 38

  3. Gold prices have hit records in rupee terms despite being... [#110366]
    By: Mark H (1363 comments) Go to top ↑

    Gold prices have hit records in rupee terms despite being rangebound in dollars. Last week they rose to 30,000 rupees per 10g for the first time. In a repeat of what happened in 2009 when Indian gold consumption fell 19 per cent the consensus among dealers is that demand is likely to fall 20-30 per cent over the full year.

    FULL ARTICLE:
    http://on.ft.com/M3fVGo

  4. Good morning. 07:00 MBA Mortgage Index (-1.3%) 10:30... [#110367]
    By: Bull Hunter (3552 comments) Go to top ↑

    Good morning.

    07:00 MBA Mortgage Index (-1.3%)
    10:30 Crude Inventories
    12:30 FOMC Rate Decision

    ——

    ADBE – Adobe downgraded to Neutral from Overweight at Atlantic Equities citing its muted guidance. Note that JMP Securities downgraded shares also this morning.

    ADBE – Adobe downgraded to Underperform from Market Perform at JMP Securities based on reduced Q3 guidance and European exposure. Price target is $26.

    AET – Cantor Fitzgerald Initiates with a Hold. Target = $45

    CSCO – Cisco upgraded to Outperform from Market Perform at BMO Capital based on valuation, solid free cash flow growth, and improved execution in core markets. Price target raised to $21 from $20.

    GOOG – PT Lowered from $650 to $615 @ Benchmark. Hold

    WAG – Walgreen downgraded to Hold from Buy at Argus. Walgreen’s acquisition of Alliance Boots increases risk to the business model.

    WAG – Walgreen downgraded to Neutral from Outperform at Macquarie. Walgreen’s acquisition of Alliance Boots does not address U.S. deteriorating traffic trends and lost pharmacy volumes. Price target lowered to $34 from $38.

    WFM – Cantor Fitzgerald Initiates with a Buy. Target = $104

    ——

    “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” ~ Thomas Sowell

  5. PRODUCER PRICE INDEX (YOY) Germany for May Actual:... [#110369]
    By: Les (7233 comments) Go to top ↑

    PRODUCER PRICE INDEX (YOY) Germany for May
    Actual: 2.1%Cons.: 2.3%Previous: 2.4%

    BOJ MINUTES for MAY 22
    http://www.boj.or.jp/en/mopo/mpmsche_minu/minu_201

    BANK OF ENGLAND MINUTES for June 6
    http://www.bankofengland.co.uk/publications/minute

    ILO UNEMPLOYMENT RATE (3M) UK for April
    Actual: 8.2%Cons.: 8.2%Previous: 8.2%

    AVERAGE EARNINGS INCLUDING BONUS (3MO/YR) UK for April
    Actual: 1.4%Cons.: 0.8%Previous: 0.9%

    CLAIMANT COUNT RATE UK for May
    Actual: 4.9%Cons.: 4.9%Previous: 4.9%

    ZEW SURVEY – EXPECTATIONS Switzerland for June
    Actual: -43.4Cons.: Previous: -4.0

    http://www.fx360.com/calendar/

  6. ADBE - numbers lowered at Credit Suisse. ADBE estimates... [#110370]
    By: Bull Hunter (3552 comments) Go to top ↑

    ADBE – numbers lowered at Credit Suisse. ADBE estimates were cut through 2014. Company is seeing slower growth in digital marketing. Neutral rating and new $30 price target.

    WAG – estimates, target cut at Credit Suisse. WAG estimates were reduced through 2014. Company may face slower growth in the U.S. Neutral rating and new $28 price target.

  7. ... [#110371]
    By: Tremendous11 (74 comments) Go to top ↑
    • Tremendous11, my bias is as Geoff's. His a seasoned, savy... [#110377]
      By: dberryclan (687 comments) Go to top ↑

      Tremendous11,

      my bias is as Geoff’s. His a seasoned, savy, technically based opinion. Mine, a whim and a pizza burp, causing me great caution.. :-)

  8. Thank you for your response to my "Underwater" question... [#110372]
    By: ChrisM (279 comments) Go to top ↑

    Thank you for your response to my “Underwater” question yesterday. In view of the 100 meter+ lengths they’re getting from their drilling, I’ve been assuming that open pit makes most sense. Keeping my position small, but I look forward to learning how they propose to mine it.

  9. If Mr. Ben does a QE instead of twist, will be adding to... [#110374]
    By: baz22 (2875 comments) Go to top ↑

    If Mr. Ben does a QE instead of twist, will be adding to the boys in the deep water Gulf.

  10. 1) Overbought 2) At resistance 3) To what effect is QE... [#110375]
    By: Ron Sen (975 comments) Go to top ↑

    1) Overbought
    2) At resistance
    3) To what effect is QE (or not) priced in?
    4) Sentiment Trader (http://www.sentimentrader.com)
    5) I have similar findings http://ronsen.blogspot.com/2012/06/measure-somethi

    Will traders play chicken or be chicken?

  11. A visual... [#110376]
    By: CaptK (71 comments) Go to top ↑
  12. ALOHA!! Just for a dose of reality while we await which... [#110378]
    By: kaimu (3289 comments) Go to top ↑

    ALOHA!!

    Just for a dose of reality while we await which way the US FED will tell us to trade the “free markets” I find the hype of Europe overdone compared to the quiet debt destruction being enforced at the US Treasury.

    June 18th the US Treasury moved the net debt, meaning debt added to the US PUBLIC DEBT for year-to-date, to $986BIL USD. We still have three more months left in the US Treasury’s fiscal year. We have net debt increasing at a rate of around $110BIL per month, so by the end of FY2012 the US Treasury will have added over $1.3TRIL USD onto our sovereign debt load. A historical record level for a fiscal year. That’s about $600BIL USD more than the ECB is willing to put up to do its latest EU bailout. That’s $1.3TRIL of new US Debt that somebody has to buy. Last year the US FED bought 77% of it!

    Then after the election in Jan 2013 we get total US Congress spending “sequester”. A nine letter word that has the same end result as the other nine letter word Europe is now awash in, but Congress does not want you to hear … “a-u-s-t-e-r-i-t-y”! Every global sovereign is extremely busy forcing its citizenry to pay for the mistakes of the politicians and bankers that facilitated the crisis. In the case of the USA in November the citizenry will elect the same “planned chaos” again. And why not? That’s how the two party political Stockholm Syndrome works! Unlike North Korea we Americans are free to vote whatever two party dictators we chose.

    Over $1.3TRIL USD of debt added in 12 months time. If I was the US Treasury I wouldn’t want interest rates to rise either!

    • Thank you Kaimu for keeping it honest. I'll go long this... [#110380]
      By: ea32da32 (2362 comments) Go to top ↑

      Thank you Kaimu for keeping it honest. I’ll go long this market when it’s WAY oversold, for now-for me the bias is down. That could change but this market has its ways of disconnecting from reality. Oil, dollar may lead the way… IMHO

      • ALOHA!! And there ya go!! Ben opts for keeping interest... [#110382]
        By: kaimu (3289 comments) Go to top ↑

        ALOHA!!

        And there ya go!! Ben opts for keeping interest rates low. To think of the US FED as anything else other than a US Treasury “agent” is to fall for the widely proclaimed claptrap of US FED independence. Imagine the US FED being just another private bank like your local regional bank. Not too many bank Presidents would completely ignore its largest depositor. The US Treasury maintains an account at the US FED. That to me is a “public money monopoly” that has no business existing.

        So if you think rates are low to stimulate the economy think again! In October 2008 the FED FUNDS RATE(FFR) was lowered below 1% since forever! In June 2003 the FFR hit exactly 1%, but did not go lower that 1%. The latest NFIB and CEO surveys show both large and small businesses in America are not going to hire within the next six months. That has been going on at the NFIB for years, so if low rates were suppose to be for the benefit of the Middle Class then pretty soon it will be four years of less than 1% rates and high unemployment. How can high unemployment be a sign of economic recovery? The rates are low so the US Treasury can pay the least amount minimum due as possible. In my opinion the more “net debt” added to PUBLIC DEBT the longer rates will have to stay low, meaning the longer QE has to continue. Believe me the US FED isn’t the only QE entity in America! The US Treasury has its own QE going on! Without unlimited debt the two party system collapses and so does the US reserve currency. Only the C WORD can end the current monopoly. It has nothing to do with economics … ITS THE DEBT STUPID!

  13. Not trading today, at work but do follow this a bit. UUP... [#110379]
    By: ea32da32 (2362 comments) Go to top ↑

    Not trading today, at work but do follow this a bit. UUP up, I’m not falling for no banana in the tail pipe trick going long this market. Will stick with my short position for now. Not getting sucked in. I don’t know much but it’s not Risk On, it may be for some stocks, it’s a pickers market.

    95% cash.

    Earl

  14. for about a month now, if APA would be attractive to... [#110381]
    By: baz22 (2875 comments) Go to top ↑

    for about a month now, if APA would be attractive to someone like CVX. With APA’s massive holdings, and relative lower share total, as compared to someone like CVX, along with their weighted 5 year ‘ chart ‘ ( no splits ), it certainly looks like a nice apple in the bunch.

  15. The "aggressive" portfolio, XLK, XLY outperforms the... [#110383]
    By: Ron Sen (975 comments) Go to top ↑

    The “aggressive” portfolio, XLK, XLY outperforms the conservative XLV, XLP so far today

    is that bullish or wishful thinking….time will tell (no position)

  16. Personally I don't know how good (or bad) this is an... [#110384]
    By: 14them34me (295 comments) Go to top ↑

    Personally I don’t know how good (or bad) this is an indication of how undervalued these companies are. I do make a mental note that over time, things will revert back to their means. Please share your opinion if you will.

    Here’re just a few that I spotted (in no particular order).

    Book Today
    LEG $10.24 $6.44
    PD $7.72 $7.12
    ECA $22.56 $22.20
    NKO $23.28 $21.54
    VLO $29.49 $23.33 (US)
    PWT $19.24 $13.57 (US – PWE)
    IMN $49.24 $43.49
    LUN $5.76 $4.38
    NDAQ $28.67 $22.26 (US)
    K $11.08 $9.08 (US – KGC)

  17. I think Bernanke made it clear; twist till after the the... [#110385]
    By: Tower Dog (90 comments) Go to top ↑

    I think Bernanke made it clear; twist till after the the election. Drop it 20% I will reconsider. Going to be a long summer. Got short today I’ll keep adding until proven wrong.

    • ... [#110386]
      By: Grym (5469 comments) Go to top ↑
      • Not much difference, It will do another $267 bln selling of... [#110388]
        By: Tower Dog (90 comments) Go to top ↑

        Not much difference, It will do another $267 bln selling of short-end and buying of the long end through the remainder of the year. $267 bln doesn’t buy much these days.

      • My understanding is QE drives short-term rates lower. Now... [#110389]
        By: Tbolt (169 comments) Go to top ↑

        My understanding is QE drives short-term rates lower. Now that they are approaching 0 and that didn’t help, Twist uses the short-term proceeds to buy longer-term bonds taking them lower. The thinking is now that both ST and LT are at ridiculous levels and that hasn’t helped, more of the same ought to do the job. Nice.

        • Tbolt - Here's the Dynamic Yield Curve so we can visualize... [#110390]
          By: Dr. Strangelove (2004 comments) Go to top ↑

          Tbolt -

          Here’s the Dynamic Yield Curve so we can visualize what you just described. Click on ‘animated’ and watch the nervous line fall at the long end through Operation Twisting in the Wind II.

          My guess is that once The Bernanke dumps all that debt into the long end, the curve could invert to draw buyers into the short end until he reverses the Twist back to the short end to keep rolling the expanding burden to supress the overall curve. That should work a few more years …

          http://stockcharts.com/freecharts/yieldcurve.html

        • Tbolt, Operation Twist, the Fed's manner of kicking the... [#110391]
          By: dberryclan (687 comments) Go to top ↑

          Tbolt,

          Operation Twist, the Fed’s manner of kicking the can down the road until after the election….now Fed can have two months off without any suspense…..sell in may and go away has worked once again….

        • Tbolt, Operation Twist, the Fed's manner of kicking the... [#110392]
          By: dberryclan (687 comments) Go to top ↑

          Tbolt,

          Operation Twist, the Fed’s manner of kicking the can down the road until after the election….now Fed can have two months off without any suspense…..sell in may and go away has worked once again….

    • The saying goes that the Fed controls the short end and the... [#110393]
      By: Ron Sen (975 comments) Go to top ↑

      The saying goes that the Fed controls the short end and the bond market the long end. So much for that.

      Load up on long bonds and when the market ‘corrects’ do we then bail out the Fed?

  18. Neither the Fed nor the ECB have enough political capital... [#110394]
    By: davefairtex (5215 comments) Go to top ↑

    Neither the Fed nor the ECB have enough political capital right now to engage in money printing. They are waiting for a Big Unpleasant Event to give them the cover to do so. Once in crisis, they will print like crazy, but until that happens, they have to sit back and jawbone.

    My guess is the crisis will come from the Spanish banking system.

  19. They continue to drop, now 6.57%. If they can get below 6%... [#110395]
    By: davefairtex (5215 comments) Go to top ↑

    They continue to drop, now 6.57%. If they can get below 6%, that may signal a reversal – a lower low in yield. Until then, we’re still in an uptrend…