Bill Cara’s Blog for Oct 22, 2012

CTA Trading Desk Morning Report

[7:00am ET] Good morning.

There were an awful lot of negative opinions in my mailbox today. Don’t fully understand why. I am standing by my views expressed Sunday morning in the WIR, and I can see that Europe’s banks and miners are doing well this morning.

http://www.reuters.com/article/2012/10/22/us-hedgefunds-rich-idUSBRE89L0…

This was an interesting article by Reuters today in which the sentiment among wealthy clients is that the typical risk-averse portfolio manager is being shunned by wealthy clients who want them to be more aggressive.

Actually all I think has happened is that clients want index-beating results and that doing so has meant being quick to get in on break-outs and quick to get out on break-downs, which of course is a tactic of computer-based momentum oriented traders — the very thing that those same clients deplored five years ago.

The problem with the latter, as I see it, is that regulators are far too slow to catch the manipulations of long/short trading syndicates. Today there are bull and bear raids that have been executed with military precision complete with paid for media coverage, and the regulators appear clueless to such shenanigans.


Good morning, Geoff here.

The downward pressure that the US Dollar’s rally has exerted on stocks and commodities should be released this week or next. This is healthy behavior because sentiment must be reset and a decline does just that. Truth be told, I would like to see; recent support levels fail, markets drop, sentiment and technical indicators work towards oversold and then I would be more comfortable getting long. We shall see if continued poor earnings can create that environment.

We are bullish stocks and commodities but saw the near term weakness and have lightened up on positions. Once time OR price works off the overbought conditions, a market rise will be easier. This weakness is corresponding to strength in the Dollar that needed to happen also. The stars are starting to align for the bulls, but one last shake out may be in the cards this week or next.

SPX:

ggimage01_102212.png

Gold chart with expectations (working beautifully) first posted on October 12th:

ggimage02_102212.png

The e-mails that Bill received regarding the market are exactly what I am talking about with regards to sentiment. This time of year, people get nervous about getting caught in a down draft, which I understand. What they are missing in their analysis is time.

As you can see in both the Daily and Weekly SPX charts below, we are in the timing band for tradable bottoms in both time series with the more important one being the Weekly because we can expect a multi-month run that should be very profitable.

ggimage03_102212.png

Weekly:

ggimage04_102212.png

It is going to get real exciting, real fast.

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 2,202.12 6:44AM EDT Up 7.97 (0.36%) Components, Chart, More
^BFX BEL-20 2,407.70 Oct 18 Down 6.50 (0.27%) Components, Chart, More
^FCHI CAC 40 3,512.65 6:59AM EDT Up 8.09 (0.23%) Components, Chart, More
^GDAXI DAX 7,380.14 6:45AM EDT Down 0.50 (0.01%) Components, Chart, More
AEX.AS AEX General 335.20 6:44AM EDT Up 1.03 (0.31%) Components, Chart, More
^OSEAX OSE All Share 493.61 6:44AM EDT Down 0.95 (0.19%) Components, Chart, More
^OMXSPI Stockholm General 332.06 6:44AM EDT Up 2.63 (0.80%) Components, Chart, More
^SSMI Swiss Market 6,764.47 6:45AM EDT Up 8.33 (0.12%) Components, Chart, More
^FTSE FTSE 100 5,901.56 6:45AM EDT Up 5.41 (0.09%) Components, Chart, More
FPXAA.PR PX Index 989.75 6:59AM EDT Up 1.46 (0.15%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,469.10 7:00AM EDT Up 12.05 (0.83%) Chart, More
GD.AT Athex Composite Share Price Index 893.60 6:45AM EDT Up 22.96 (2.64%) 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.

  1. 11:30 AM ET 3-Month Bill Auction 11:30 AM ET 6-Month... [#114352]
    By: davefairtex (5215 comments) Go to top ↑
    • 11:30 AM ET 3-Month Bill Auction
    • 11:30 AM ET 6-Month Bill Auction
  2. 2 in Accumulation Zone 2 in Distribution Zone 5 in Sell... [#114353]
    By: davefairtex (5215 comments) Go to top ↑
    • 2 in Accumulation Zone
    • 2 in Distribution Zone
    • 5 in Sell alert

    Accumulation Zone (7%): Monthly 2, Weekly 3, Daily 16
    Distribution Zone (9%): Monthly 10, Weekly 13, Daily 6

  3. ... [#114354]
    By: Bull Hunter (3552 comments) Go to top ↑
  4. ... [#114355]
    By: Grym (5469 comments) Go to top ↑
    • Grym, I was referring to opinions with respect to... [#114356]
      By: Bill Cara (4105 comments) Go to top ↑

      Grym,

      I was referring to opinions with respect to equities, commodities and precious metals.

      My opening comment in the WIR was that already on Friday and Saturday I could see traders switching from bull to bear because of the selling that took place in US markets on Friday afternoon. I reiterated the expression that trends are not made in a day. So far this morning I do not see any follow-through of negative market sentiment. Europe’s banks and miners & oilers are strong.

      Of course, we have to be prudent. As for me, our cash position has risen from virtually zero to 27% in the past couple weeks.

      • "I was referring to opinions with respect to equities... [#114362]
        By: Grym (5469 comments) Go to top ↑

        “I was referring to opinions with respect to equities, commodities and precious metals.”

        So was I.

        I think all the other negative issues spill over on the emotions of people and have an affect on attitudes in general. Just like a bad day ends up with kicking the dog.

      • Bill, I generally read your blog simply for your macro... [#114363]
        By: squarpeg (11 comments) Go to top ↑

        Bill,
        I generally read your blog simply for your macro view. I must say you have really gone out on a limb here with some very definitive predictions about the future…. The great reflation has begun, equities 15% higher, gold $3000, A highly probable war in middle east, time frame targeted at about 1 year, followed by major economic collapse…….. It takes a lot of hutzpah to make these types of future predictions. When your the “wizard trader” people pay attention to what you say and in the end they remember your call right or wrong, which makes your statements all the more bold.
        I don’t know if your right, for all our sakes I hope not, but it does seem to draw on sound logic which is worrisome. I will be following closely to see if your vision of the future comes to pass. I am actually most interested in what you would do during the coming great collapse. That would be an interesting topic….hey it’s only a year away might as well start preparing now.

        • Bill's previous predictions did come to pass, but even Bill... [#114366]
          By: Craig (2014 comments) Go to top ↑

          Bill’s previous predictions did come to pass, but even Bill admitted they were delayed some by Bush ‘parachuting’ Hank Paulson in from Goldman and Bill’s call on the market decline turned out to be prescient and accurate, but slightly conservative.

          I would leave room for Bill to be an optimist.

          Timing depends on how quickly Iran can move and how much Israel can push Washington. The collapse is classic Sun Tsu. My bet Obama has read the Art of War and Romney, like Bush, hasn’t, or if he has, will ignore it. Regardless, Obama has modeled his ‘war on terra’ after Bush, then added steroids and more drones. Flip a coin.

  5. http://www.telegraph.co.uk/finance/comment/9623863... Do... [#114357]
    By: Les (7233 comments) Go to top ↑

    http://www.telegraph.co.uk/finance/comment/9623863

    Do away with private credit and reinstate sovereign created money. I think a 12 year old Canadian girl covered that monetary policy recently. Things’ll have to get a lot worse before that happens me thinks…

    ——————

    Bill, got my hands on Deron’s newest book and quickly started mucking around with his combination of fib time zone and fib retracement.

    I’ve likely hashed up this first attempt at such analysis, but I do note an end of October potential for SLV at $30 and IWM at close to $80. That would sort of fit in with Geoff’s chart for $gold that he published recently. Curious to learn more of Deron’s work.

    Certainly a recommendation to buy his book.

    • Good stuff Les. Deron's system is a trend momentum system... [#114360]
      By: Craig (2014 comments) Go to top ↑

      Good stuff Les.

      Deron’s system is a trend momentum system similar to Dave Landry which I’ve been using for awhile. I love to check in to see what Deron has found recently. The recommendations tend to be bigger, ‘thicker’ more liquid equities like ETF’s. They don’t move as fast (less volatility) but they are less risky.

      Colin Twiggs sent out a post last night on the Chicago Program for monetary reform. Bill has long written about some international currency agreement, this may be something that might work.
      http://home.comcast.net/~zthustra/pdf/a_program_fo

      As far as all the political hoopla, we are working on deleveraging a systemic debt crisis. Like all debt crises, the answer is in paying down the debt. The economy will improve when we pay off enough personal debt to increase demand. Until then, unless some President offers to wave a magic wand and absolve all debt, there will not be two cars in every garage and a chicken in every pot. It will take time. As Reinhart and Rogoff suggest in their study, it takes on average 10 years to exit a systemic debt crisis. At four years out we aren’t doing so bad.

    • Maybe that IMF solution can convince 12 years old girl that... [#114361]
      By: Vadym Graifer (4341 comments) Go to top ↑

      Maybe that IMF solution can convince 12 years old girl that for some reason became an ultimate authority in financial matters, but I remain apprehensive about body like Congress deciding on money-creation issues.

      Limit banks’ ability to create money out of thin air by raising fractional reserve requirements. Limit their ability to take risks with retail deposits by reinstating Glass-Steagal. Limit their ability to threaten stability by breaking them down and making sure none of them is TBTF. I will applaud any of these steps. But to create a government Leviathan-sized body with no control whatsoever, drawn in all directions by partisan, ideological and regional motives and hope that it will give us sound monetary policies? It’s a cure worse than disease, IMO.

      • ... [#114364]
        By: Craig (2014 comments) Go to top ↑
        • "I don't see how it creates a government leviathan sized... [#114365]
          By: Vadym Graifer (4341 comments) Go to top ↑

          “I don’t see how it creates a government leviathan sized body”

          From the linked article: “The conjuring trick is to replace our system of private bank-created money — roughly 97pc of the money supply — with state-created money.”

          This idea pops up regularly, and state becoming money and credit issuer is a corner stone of it. Saying “Federal Reserve will create it” doesn’t answer the question since it’s a two-headed beast. Which head will create money, private or state?

          • "The 100% reserve requirement would, in effect, completely... [#114367]
            By: Craig (2014 comments) Go to top ↑

            “The 100% reserve requirement would, in effect, completely separate from banking the power to issue money. The two are now disastrously interdependent. Banking would become wholly a business of lending and investing pre-existing money. The banks would no longer be concerned with creating the money they lend or invest, though they would still continue to be the chief agencies for handling and clearing checking accounts.”

            It sounds to me like the currency would not be based on debt and the Fed mission limited to one goal (head?). I would assume the Fed would be more like Treasury and less central bank of banks.

            I would however be naive to not be concerned, like yourself, with “conjuring tricks”. The devil is always in the details and I doubt bankers would simply roll over and play dead.

          • Well, someone will still issue credit - the idea that... [#114369]
            By: Vadym Graifer (4341 comments) Go to top ↑

            Well, someone will still issue credit – the idea that society will stop using it altogether is unrealistic on all levels – private, corporate, municipal. So the question remains – who?

          • We can legally require all entities that extend credit to... [#114371]
            By: davefairtex (5215 comments) Go to top ↑

            We can legally require all entities that extend credit to back all credit they extend with actual savings. In that way, we will limit money creation. So companies like GE who want to let their customers buy jet engines without putting any money up front must reserve actual cash to do it. 100% reserve requirement means exactly that – in all cases.

            I dislike the concept of money created from nothing. It would seem to violate a law of physics. It just seems wrong. And I know someone is benefitting from it – and that someone is NOT ME because I don’t have a bank charter!

            I think you are right though. Things could be greatly improved and a lot of control issues could be resolved by chopping the banking system into little bits so that the power is spread across the industry rather than being concentrated into 5 people’s hands. And prohibiting trading by banking firms, and raising reserve requirements would all help a lot too.

            But with less than a 100% reserve requirement, money creation would still be controlled by the Fed, at least during normal times, through interest rates. Which is a lot of power to give these guys, who are still owned & operated by the banks.

            And having debt-based money has this endemic problem, in that the money supply must continually grow, because while the money was created to repay principal via the debt, it is not enough to repay principal and interest. That would not be the case with state-printed money. Since it is not backed by debt, it would operate better in a steady-state environment.

            With a 100% reserve requirement, we also lose the deflationary impact of debt default, simply because money hasn’t been destroyed. Money under such a system can neither be created, nor destroyed – it can only be transferred between parties. Likewise, there’s no inflationary impact from a credit expansion, because there can be no credit expansion. No more boom/bust cycle, at least not from credit.

          • Dave, it's not fully clear to me whether 100% reserve is a... [#114373]
            By: Vadym Graifer (4341 comments) Go to top ↑

            Dave,

            it’s not fully clear to me whether 100% reserve is a good idea from the point of view of financing growth and innovation. It could be that some balance is needed between preserving cycles themselves while severely limiting their severity, pardon the pleonasm, and eliminating them altogether while killing growth. However once the system is established and stabilized with some reasonable reserve (say 50% for starters?), it can be tested and tweaked.

          • The article seems to suggest it would be banks using their... [#114372]
            By: Craig (2014 comments) Go to top ↑

            The article seems to suggest it would be banks using their own profits and customers non-demand money. So banks would rely in part on the owners of capital and be forced to pay a fair return. There would still be credit, but not unlimited credit as we have now with the risky fractional reserve system.

            It would be more pure capitalism and a return to savings and compound interest.

          • Craig... but it's still state that creates money under... [#114374]
            By: Vadym Graifer (4341 comments) Go to top ↑

            Craig… but it’s still state that creates money under their suggestion… thus my objection stands. It’s a road to disaster, as sure if not more so as what we got under existing system, IMO.

          • ... [#114375]
            By: Doug2 (14 comments) Go to top ↑
          • I think public money creation doesn't specifically solve... [#114368]
            By: davefairtex (5215 comments) Go to top ↑

            I think public money creation doesn’t specifically solve anything. It simply moves the dirt we have from one pile to another – it changes private banker misconduct into public official misconduct.

            Do I trust politicians to print money more than I trust private bankers? That’s a tough one. I’d suggest some sort of rule-based system but – who makes the rule, and then who enforces it? Who appoints the enforcers? Who watches the watchers, as it were? Congress? Some government bureaucracy? Like the BEA? Can you imagine how that would work come election time? A flood of new money makes everyone happy, at least initially, and that temptation to print would likely be irrepressible.

            Honestly, I’d lean towards public officials, but its a pretty close call for me. My key requirements would be complete transparency (daily releases of monetary operations details), along with zero-tax alternatives for savings such as gold. As long as savers have a place to hide, and the ability to see the devaluation train coming a ways away, I think it would be ok.

            Perhaps printing above the population growth rate and/or the GDP growth rate would be forbidden without the Advice & Consent of the Senate (i.e. 2/3 vote).

            Getting rid of the instability inherent in fractional reserve banking would be a blessing, and likely worth the effort. My opinion anyway.

          • Dave, I mostly agree, with one difference. For me, it's... [#114370]
            By: Vadym Graifer (4341 comments) Go to top ↑

            Dave,

            I mostly agree, with one difference. For me, it’s not a close call – I would never trust Congress or some government bureaucracy to operate this machinery. Private credit issuers constrained by much higher fractional reserve requirements, by Glass-Steagal and cut down in size so they could fail when make bad decisions is the only system I’d see as viable.

          • That system worked really well.......for the former Soviet... [#114379]
            By: Ilya (572 comments) Go to top ↑

            That system worked really well…….for the former Soviet Union.

          • Yeah, and you'd think the idea should be already buried... [#114383]
            By: Vadym Graifer (4341 comments) Go to top ↑

            Yeah, and you’d think the idea should be already buried. Yet there you go – it pops up again and again, and gathers followers.

            When USSR died, I never thought it’d live forever. Now I think it never died and never will.

    • The 'International Mandates Fraud' aka IMF is itself a... [#114382]
      By: Ilya (572 comments) Go to top ↑

      The ‘International Mandates Fraud’ aka IMF is itself a study in stupidity. That they actually pay lackys to write papers about which they know nothing only reinforces the widely held belief that the IMF is the ‘enforcer’ for banking interests controlled BY their respective government ‘subscribers.’ The whole scharade is disingenious from the get go…

      The university Popes that write these ridiculous tomes have no appreciation of the history of Western money thought which has evolved smoothly for the last 1200 years. They even got the dates wrong! ‘Money’ first intervened against politics at the Congress Of Vienna in 1814!

      Fractional banking is not a bad thing in itself. Concentrated banking interests along with lax oversite explains 70% of our recent financial problems. Hell, there wasn’t even INTERSTATE banking until the Bank Holding Company Act circa the late 1960′s.

      Granted that the banksters are an easy target for the current common ‘angst’ but remember who allowed this to occur… Your (not so friendly) Federable Gummit! Gotta bless those Demuplican Republicrats.

      There is no solution to over-indebtedness except default or inflation…period. Given that the hoi poloi have an increasing voice, which avenue do you believe we will travel? The helots will demand their bread vs. any short term lash. Free?, healthcare is even better.

      It’s all a game and if you choose a side, you will lose. Better to fend for yourselves than become a pawn in the Circe Comedia.

  6. MCD - estimates, target cut at Lazard. Shares of MCD now... [#114358]
    By: Bull Hunter (3552 comments) Go to top ↑

    MCD – estimates, target cut at Lazard. Shares of MCD now seen reaching $101. Estimates also reduced, as the company is facing increased competition. Buy rating.

    SLB – estimates, target increased at Guggenheim. SLB estimates were raised through 2013. Deepwater exploration demand remains strong. Buy rating and new $90 price target.

  7. I took the opening pop in EXK, got a nice scalp, exited the... [#114359]
    By: papadynamite (446 comments) Go to top ↑

    I took the opening pop in EXK, got a nice scalp, exited the position, and now 100% cash. Although I trade on a 10 minute time frame, I do refer to daily charts for overall market direction and note that, for almost all charts I follow, the MACD is still falling under the -0- line. And generally, they don’t change direction instantly..

  8. Had a nice run today, it is testing the consolidation. It... [#114376]
    By: Sync (166 comments) Go to top ↑

    Had a nice run today, it is testing the consolidation. It barely exceeded the consolidation though, not enough to convince me to jump in. I predict it will go down tomorrow. Looking into the price I feel comfortable to buy at.

  9. Rolls - Royce has partnered with Textron to supply gas... [#114377]
    By: BOB 47 (361 comments) Go to top ↑

    Rolls – Royce has partnered with Textron to supply gas turbine engines for a new U.S. fleet of 72 hovercraft . Each craft will lift and carry 74 tons of cargo at speeds that exceed 35 knots . Rolls is one of the few companies still involved in producing engines . http://www.telegraph.co.uk/finance/newsbysector/in

  10. ... [#114378]
    By: Illini (672 comments) Go to top ↑

    http://www.dailymail.co.uk/news/article-2219240/Ta

    Extraction and destruction. How can you/we support the couple of companies in the Cara 100 that are so deeply involved?

    • I like to know what industry on earth is pure and 100%... [#114381]
      By: 14them34me (295 comments) Go to top ↑

      I like to know what industry on earth is pure and 100% benefitial to humanity with no bad side effects. If you drive a car, fly in a plane, or take a train, have a home built with lumber, take prescription drugs, use electricity, Natural Gas, etc., you too are indirectly contributing to pollution and whatever wrong the industry commits.

      First check out the size of the area concerned. Just because you have a cyst on your back and the camera focuses on it, doesn’t mean you have cyst all over your body. Also check out these reforestation program, habitat rebuild for the deer and the birds. http://www.srd.alberta.ca/LandsForests/ForestManag

      Then check out the Natural beauty of the rest of Alberta, famous for the Banff, Jasper, and numerous National and Provincial Parks. Wooo Hooo Hooo …. Nature is destroyed !! Nature is destroyed !!
      http://canada.travelall.com/ab/act/parks.htm

  11. Greetings All, busy day at work, will be a busy week but... [#114380]
    By: ea32da32 (2362 comments) Go to top ↑

    Greetings All,
    busy day at work, will be a busy week but was able to pick up 30 GE JanC21 for $1 this morning, 3 more CAT FebC85′s for $4.15, same on MCD – hopefully I can take some profits next couple days…

    UNG – I would LOVE to get back in the Calls at $21.30 – fully expect ng $4 eoy.

    Enjoy the debate;-)

    Earl

  12. As a flight of fancy, I propose the opposite scenario to... [#114384]
    By: Les (7233 comments) Go to top ↑

    As a flight of fancy, I propose the opposite scenario to Bill – the market is waiting for a new Prez and this fiscal cliff thingy and then all hell breaks loose. Heck, ze Germans are on again/off again about what it will do for Europe, so maybe their jawboning has taken them as far as it will too.

    In the monthly time frames all indexes, particulary the S&P and Dow show an ascending narrowing wedge, with degrading RSI bearish divergence and worsening volume. That in itself is not a reason to short this market – the interventionists hold all the cards.

    The S&P exploding to the upside and breaking out of this wedge in a parabolic fashion as the elections play out would certainly constitute topping action – that could be an alternative play out of this particular chart formation.

    I’d wanna see topping action – and that we don’t have yet. Alternatively, it could be signalling another 20% drop before we move higher – I notice Marc Faber raising cash for such a prospect. It looks like those short-term targets may come into play – approx. $80 for IWM, $30 for silver – then I can only play the cards shown to me at this support. What say you Uncle buck?

    Jesse is looking for cup and handle in $gold, so if the metal melts down too far that may be negated – mark time, wait and see. If Bill wants miners last off the dance floor, how about some topping action going into years end before a massive inverted cup and handle plays out? An unlikely scenario, but given the very tepid response to QE unlimited, it’s a small possibility.