Bill Cara’s Blog for Sep 12, 2012

CTA Trading Desk Morning Report

[7:00am ET] Good morning.

The Michael Lewis article on Obama is an interesting read:

http://www.vanityfair.com/politics/2012/10/michael-lewis-profile-barack-…

Meanwhile, confidence in Europe strengthens following the German court decision.


Good morning, Geoff here.

The German court decision was positive for the markets today, now we wait to see what the Fed has in store for us tomorrow.

While we wait for Big Ben’s announcement, I’d like to quickly show you how we use sentiment to help our trading.

Gold and silver have been on strong runs recently. The most successful way to trade the metals is to buy weakness and sell strength. Much of that has to do with the fact that the metals tend to be a very emotional trade – people allow their feelings to drive their trading decisions as they puke at bottoms and buy tops. To make sure that you are making the correct decision, you need to track sentiment, which we do through sentimentrader.com (charts provided by sentimentrader.com).

In the following 2 charts, you can see that public opinion in gold and silver have risen along with the price of the metal. In other words, the room is growing more crowded and the door is shrinking.

ggimage01_091212.gif

ggimage02_091212.gif

This is not a tool to use alone, but it does provide an important piece of the puzzle and it is saying that buying now is a higher risk proposition than weeks ago when we were bullish precious metals.

In the long-term we continue to be bullish and short-term price action could continue to drive prices higher as more and more traders get back on the PM bandwagon. However, odds are rising that a pullback is on the horizon and with the news from Germany driving the euro higher, we need to look at the US Dollar which could make a big move tomorrow on the Fed announcement.

Here is the public opinion poll on the US Dollar:

ggimage03_091212.gif

You can see that it is in negative sentiment territory that has led to rallies in the past.

Here is the chart of the dollar that I showed you on Monday that signaled a continued downtrend in the intermediate term but also shows that the buck could be due for a short-term bounce.

ggimage04_091212.png

I think the way to play this is to wait until you get a swing low in the dollar and watch the rise. Then you are in position to buy precious metals into weakness if you have low exposure.

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 2,144.83 6:44AM EDT Up 17.12 (0.80%) Components, Chart, More
^BFX BEL-20 2,419.00 Sep 11 Up 8.00 (0.33%) Components, Chart, More
^FCHI CAC 40 3,556.14 6:59AM EDT Up 18.84 (0.53%) Components, Chart, More
^GDAXI DAX 7,369.77 6:45AM EDT Up 59.66 (0.82%) Components, Chart, More
AEX.AS AEX General 338.01 6:45AM EDT Up 1.90 (0.57%) Components, Chart, More
^OSEAX OSE All Share 499.55 6:44AM EDT Up 3.63 (0.73%) Components, Chart, More
^OMXSPI Stockholm General 334.12 6:44AM EDT Up 1.99 (0.60%) Components, Chart, More
^SSMI Swiss Market 6,508.81 6:45AM EDT Up 5.51 (0.08%) Components, Chart, More
^FTSE FTSE 100 5,799.04 6:45AM EDT Up 6.85 (0.12%) Components, Chart, More
FPXAA.PR PX Index 960.10 6:59AM EDT Up 6.70 (0.70%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,478.60 6:59AM EDT Up 2.31 (0.16%) Chart, More
GD.AT Athex Composite Share Price Index 763.70 6:45AM EDT Up 32.19 (4.40%) 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. [No set time] FOMC Meeting Begins 7:00 AM ET MBA... [#113200]
    By: davefairtex (5216 comments) Go to top ↑
    • [No set time] FOMC Meeting Begins
    • 7:00 AM ET MBA Purchase Applications
    • 8:30 AM ET Import and Export Prices
    • 10:00 AM ET Wholesale Trade
    • 10:30 AM ET EIA Petroleum Status Report
    • 1:00 PM ET 10-Yr Note Auction
  2. 2 in Accumulation Zone 1 in Buy alert 5 in Distribution... [#113201]
    By: davefairtex (5216 comments) Go to top ↑
    • 2 in Accumulation Zone
    • 1 in Buy alert
    • 5 in Distribution Zone
    • 8 in Sell alert

    Accumulation Zone (3%): Monthly 5, Weekly 3, Daily 3
    Distribution Zone (28%): Monthly 16, Weekly 35, Daily 33

  3. (in reply to #113195) This kind of info and possible... [#113203]
    By: Grym (5469 comments) Go to top ↑

    (in reply to #113195)

    This kind of info and possible alternatives is one of the main reasons I come here.

    As one who is far less concerned with the minute to minute, or even day to day market, I look for those things which may cause a major and longer term change.

    Thanks Vad and others who added comments.

    I assume (just a guess) this will adversely affect the U.S. equity market ST, and draw foreign investors from U.S. Treasuries over a longer time frame.

    Anyone?

    Grym

    • Noticing some potential for risk off Grym. $GDOW:TLT and... [#113206]
      By: Les (7233 comments) Go to top ↑

      Noticing some potential for risk off Grym.

      $GDOW:TLT and $COMPQ:$INDU weekly both displaying bearish RSI divergences. The daily on $COMPQ$INDU made me think of a completed cup, awaiting its handle (November time frame anyone??).

      $SPX:$VIX showing lower high in the complacency zone as these markets inch up while $VIX itself appears to be making a comeback – all the while market punters are betting on higher prices, albeit with muted sentiment. Retail traders are not in the game – sitting on the sidelines still?

      http://www.sentimentrader.com/

      The signs are there. I’ll wait to see price speak. PM market reaction to the FOMC decision today will be worthy of note.I notice Deron tightening an index ETF stop…

  4. German court decision was at 4:00 GMT or 8:00... [#113204]
    By: Dr. Strangelove (2004 comments) Go to top ↑

    German court decision was at 4:00 GMT or 8:00 EST.

    http://www.ft.com/home/uk

    About $1 trillion on the way.

  5. I have enjoyed the "banter" lately here at the community... [#113205]
    By: dberryclan (687 comments) Go to top ↑

    I have enjoyed the “banter” lately here at the community with the likes of the recent “Troller”.. etc Please move on MTN…whoever.

    Re: Les, “I’m betting against Fed action at this point, but am ready for the mother of all risks on if he should follow in his illustrious predecessors footsteps as an unrepentant bubble blower.”
    My very dull crystal ball tells me a sell the news scenario very likely by Friday. Maybe Gold 1800 and AAPL over 700, for a pause that allows another hop on the reflation trade.(?)

    Re: Dr. StraneLove , “Politics haven’t changed much over the millenia, IMO. That’s the only point here.”
    A read of the political bantering during Lincoln’s era prior to his presidency and of course during, allows one the same conclusions. Disinformation, Headline Hijacking, name calling, just like a Sunday morning talk show.

    I am once again grateful for Bill, his team here at Cara Community, and the members who continue to contribute to the transformation of my ability to manage my families wealth. Hope to attend a conference in 2013.
    Grats, DB

  6. ... [#113207]
    By: Bull Hunter (3552 comments) Go to top ↑
  7. Doubt - that film with Meryl Streep and Philip Seymour... [#113208]
    By: Les (7233 comments) Go to top ↑

    Doubt – that film with Meryl Streep and Philip Seymour Hoffman, anyone seen it?

    http://www.imdb.com/title/tt0918927/

    I’m working on my gameplay, which for the most part means dealing with boredom while refraining from taking setups that aren’t simply there for reasons that Livermore speak clearly enough of.

    But I have doubts. I get caught up in bullcrap setups that don’t exist or are marginal – and I’m wondering if I’ll ever make it as a trader.

    Then setups like the following show up on screen in front of me. see attached.

    And it is a thing of beauty. Think I read this morning from Livermore that if you scrap 90% of the setups you’ve previously taken, and focus on the top 10%, you’ll make it so much better.

    Well, that’s what I’m aiming for before I put up another brass razzoo to play in the shark pit.

    111 Trades – love it.

    ———————–

    Oh and there’s the PM reaction to the no show from Bernanke. Miners already deflating. Long silver for a positional trade and short the miners in my mind for an intraday trade. Love this game.

    • You are very welcome, and yes, beautiful setup. The one I... [#113209]
      By: Vadym Graifer (4341 comments) Go to top ↑

      You are very welcome, and yes, beautiful setup. The one I am about to post as Catch of the Day will look vaguely familiar to you :)

      IMO, 111 Trades is a course one can use a shortcut in learning – can trade off it alone without much education in other aspects of trading. Not that I advocate such approach, but…

      • Yes, I've been watching futures prices since 8am GMT this... [#113211]
        By: Les (7233 comments) Go to top ↑

        Yes, I’ve been watching futures prices since 8am GMT this morning and noticed that despite the brief pop over 34 silver bulls weren’t buying the German court ruling.

        But then to not make that link immediately in seeking an appropriate setup on the miners coming into today’s session illustrates in my mind the glue that is missing between analysing a market, or holding a market opinion, and then putting 111 Trade to good use to capitalise on that analysis. It was by pure chance that I started flipping through stocks as I got bored of looking at the indexes.

        Where I stand today as a trader, I could not advocate just working of a purely mechanical approach. However, if my boy should so desire to learn this game…

        As Nemo would say, still not mindful of my geography.

  8. Right from 111 Trades... [#113210]
    By: Vadym Graifer (4341 comments) Go to top ↑
  9. Good morning all;-) COF was holding up well but with the... [#113212]
    By: ea32da32 (2362 comments) Go to top ↑

    Good morning all;-) COF was holding up well but with the SPX dropping toward yesterdays close I took the 25% and ran, looking to get back in. I’ve added one short, bought some SLB Oct72.5 puts at $1.67 – the $75 area seems a tough one to crack, will see how this one works out…
    best to everyne,
    Earl

  10. ... providing you have an hour. Interview with Kovacevich... [#113214]
    By: Vadym Graifer (4341 comments) Go to top ↑

    … providing you have an hour. Interview with Kovacevich, former WFC CEO, very good one IMO:

    http://video.cnbc.com/gallery/?video=3000115498&pl

    • Hi Vad, I'm no longer surprised by anything that goes... [#113216]
      By: ea32da32 (2362 comments) Go to top ↑

      Hi Vad, I’m no longer surprised by anything that goes on.

    • I just read the transcript beside, quicker. I've noticed... [#113217]
      By: westcoaster (1130 comments) Go to top ↑

      I just read the transcript beside, quicker. I’ve noticed voice recognition is taking off. I get it with my celphone voicemails now. Accuracy about 80%. Watch NUAN. Siri in AAPL etc. This guy Kovacevic is embarrassing the hell out of the Banksters. Doing a good job of it.

      • Hi West; I like the reverse H&S setup on NUAN - thanks... [#113220]
        By: ea32da32 (2362 comments) Go to top ↑

        Hi West; I like the reverse H&S setup on NUAN – thanks for the heads up. I took a tiny call position and if it plays out like it could I have time to add more;-)

        take care,
        Earl

  11. Step in the right direction "This, of course, is just one... [#113219]
    By: westcoaster (1130 comments) Go to top ↑

    Step in the right direction
    “This, of course, is just one hangover from the antics of Peter Cummings, the gung-ho head of corporate lending at HBOS, who would evidently extend money to any businessman, so long as they were short and fat and in property or retail, or both.”
    http://ftalphaville.ft.com/blog/2012/09/12/1157741

  12. ALOHA!! Lately and especially today we have been getting a... [#113218]
    By: kaimu (3289 comments) Go to top ↑

    ALOHA!!

    Lately and especially today we have been getting a sample of what things look like when a mining operation goes bad. Case in point Great Basin Gold(GBG:NYSE). Down some 60% today!

    In this case you can see what happens when worse gets worser and then gets worser again and then when you think the bottom is in it gets worse!

    On a one year chart GBG is down over 95%! Currently trading intraday at $0.08USD down from a one year high on $2.29! Many are wondering if this is a bargain at $0.08. On a fundamental basis I do not think so. You could take a chihuahua position based on the value of the Hollister Mine in Nevada, but then you are faced with the value of those assets boat anchored to a very high risk mining venture in South Africa that has been suspended. The added costs to shut down a mine will divert capital from the Hollister Mine.

    The CEO presentation says it all. The cash cost per ounce to mine the Burnstone, South Africa project was running at over $2,300 for Q2/2012 versus $1,800 in FY2011. I would not own shares in a company with those sorts of cost overruns. With the major debt events that are engulfing the world now it is not a good time to pretend future profitability can be achieved from current losses. The same cash cost to operate the Hollister Mine in Nevada also increase to $900+ in Q2/2012, much better than the South Africa operations which according to the CEO got mired in infrastructure issues and I am sure government/labor issues did not help. There are other issues like the recovery rates, but suffice to say the bottom line is you cannot make ends meet when you are spending over $2,000 to produce a product you only get $1,500 for.

    Now if you look at the chart below you can see there were ample opportunities for GBG shareholders to step off that sinking ship back in Sept and Oct last year.

    LINK: http://tinyurl.com/9emhgay

    Clearly management did not perform. Costly mistakes were made. A lesson that just because a company is listed on the NYSE/NASDAQ does not guarantee its future. Now there is the distinct possibility that all those added funds management spent on seeking the prestige of the NYSE will be delisted away.

    Also lets not forget the job losses for the union miners who worked at the Burnstone project. Also there is the lost tax revenues for the South African government. Perhaps this will help the South African government to see how important infrastructure is for foreign investment and the future of the South African economy. Is there unemployment insurance and EBT in South Africa?

  13. ... [#113221]
    By: rlogan1301 (164 comments) Go to top ↑
    • ... [#113222]
      By: Grym (5469 comments) Go to top ↑
      • Grym: Have just now noted your post and so, with usual... [#113233]
        By: dnfrm (88 comments) Go to top ↑

        Grym: Have just now noted your post and so, with usual attempted respect, I do inquire re the basis for your opinion that Lewis “… allowed himself to be used ( my view )… “. Have you perchance read any of Lewis’ prior writings re financial/investment shenanigans and do such somehow contribute to your skepticism re the article? I am certainly cognizant of your negative appraisal of Obama as evidenced by multiple posts over the years and indeed, if such is your view, than so be it. But, again, am puzzled by your above quoted excerpt.

    • ... [#113226]
      By: BillySundance (1355 comments) Go to top ↑
      • ... [#113227]
        By: rlogan1301 (164 comments) Go to top ↑
        • I see his words in the same light as what I said. He was... [#113228]
          By: BillySundance (1355 comments) Go to top ↑

          I see his words in the same light as what I said. He was explaining (to a crowd that had been almost univerally ignored in the decision making process for the Iraq war) the notion of a “just” war. This was significant because the previous administration had never been very forethecoming in providing reasoning on an international stage. Obama sought to bridge that gap.

          There was obviously no easy way out on this one – that was the intent of those that chose to give him the prize – to force a response. There would have been a tsunami-sized backlash in the international media had he declined the award. Perhaps whatever small amount of backlash existed in response to him accepting the award would have been more appropriately placed with those who give the award for changing the criteria.

          • Guys... you are discussing it as if the nomination was... [#113229]
            By: Vadym Graifer (4341 comments) Go to top ↑

            Guys… you are discussing it as if the nomination was total news for the President and his crew up until the winner was announced. The deadline for nominations had to be filed by February first, many months before the jury decision. Does anyone really believe the nominees were clueless they were nominated?

            According to the Committee the POTUS won the Nobel Peace Prize on for giving the world “hope for a better future” and striving for nuclear disarmament. And he did all that in 11 days, between January 20th (when he took office) and February 1. If he didn’t think he deserved the prize (and that is providing the group that nominated him was not related to his team), he had plenty of time to work behind the scenes to withdraw the embarrassing candidacy.

          • ... [#113230]
            By: Grym (5469 comments) Go to top ↑
          • ... [#113236]
            By: ea32da32 (2362 comments) Go to top ↑
          • A picture is worth a thousand... [#113237]
            By: Bull Hunter (3552 comments) Go to top ↑

            A picture is worth a thousand words…

            http://is.gd/9s2g45

          • Horizon Auto Center has been my only mechanic -go to- for... [#113240]
            By: Ilya (572 comments) Go to top ↑

            Horizon Auto Center has been my only mechanic -go to- for over 25 years. The owner, Ken Sterling is a hoot. One of his zingers from a few years ago was “I’d rather go bird hunting with Dick Cheney than take a ride with Teddy Kennedy.”

            The Nobel Peace Prize is a political apology by Svedish socialists who profiteered by selling strategic material to both sides during WWII. That ‘Prize’ is comparable to the Stalin ‘Prize’ for the man who digs the most coal in the Donetks basin.

          • This says it ALL! (Saving this for a later laugh when I... [#113248]
            By: Grym (5469 comments) Go to top ↑

            This says it ALL!

            (Saving this for a later laugh when I need one ;-)

            Grym

    • While many on this site seem to maintain that Romney would... [#113231]
      By: Dave M (437 comments) Go to top ↑

      While many on this site seem to maintain that Romney would be an improvement over Obama on economic matters, even conservative outlets such as Fox are showing that Obama and Romney poll almost evenly on economy, while Obama maintains a huge advantage in areas such as foreign policy, fighting terrorism, education, health, protecting middle class, and even on character traits such as honesty. Obama is not perfect, but at least he has a spine. Mitt could be more properly described as a “milquetoast”, an American expression or term for a weak, ineffectual or bland person, place or thing.

      • Hi Dave M - Not perfect is it? How about reasonable... [#113232]
        By: Luggie (639 comments) Go to top ↑

        Hi Dave M – Not perfect is it? How about reasonable resource development which he and the minions have stymied at most every turn. May his rule be short lived. Long NAK & Happy Trading

  14. thought i would... [#113223]
    By: rlogan1301 (164 comments) Go to top ↑
  15. So this is actually a year-old paper, written back in 2011... [#113224]
    By: davefairtex (5216 comments) Go to top ↑

    So this is actually a year-old paper, written back in 2011 suggesting that food riots are often tied closely to high food prices. It comes with some nice charts, that uses the UN’s food price index as a baseline and plots when various food riots occurred in different countries.

    Kaimu has often called SNAP “anti-riot insurance” and here is some pretty reasonable evidence that suggests he is right. A related, oft-repeated homily is, every society is only 9 meals away from revolution.

    http://arxiv.org/pdf/1108.2455v1.pdf

    Something to bear in mind when looking at the current FPI chart (link below) is that the FPI has in recent years pretty closely tracked the price of oil. I added oil prices to the FPI chart just for fun.

    Now naturally this stuff only happens in places that don’t have SNAP programs, and whose populations are so poor that they’re already spending some large chunk of their incomes on food. I don’t have a list of those places, unfortunately.

    Call this “an additional country risk” or just “unintended consequences of money printing” – I’m not sure where to file this one. But worth considering, I think, now that money printing is slowly becoming a certainty, and there are more rumors of someone bombing Iran. Money printing + war = higher food prices = poor people rioting = a whole lot more instability.

    • there's your global income map, date for 2009. Present US... [#113242]
      By: Les (7233 comments) Go to top ↑

      there’s your global income map, date for 2009. Present US food prices are approx. 10% of income, which reflects differences in oil prices I imagine.

  16. Those of you who follow my daily ETF analysis on this blog... [#113225]
    By: Deron Wagner (77 comments) Go to top ↑

    Those of you who follow my daily ETF analysis on this blog know that I am never blatantly self-promotional, but I can’t resist in this case because I am proud to announce that my new book has just been released by Wiley/Bloomberg Press (available in both hard back and Kindle formats). Here is the link with details:

    http://blog.morpheustrading.com/1995

    By the way, I’ve checked out Bill’s recent e-book and it’s good stuff. Highly recommended if you haven’t bought it yet.

    Sorry about the little self-promo (won’t happen again…not for a long time at least). :-)

    Deron

    • Deron, enjoying the preview published in Amazon. RSI in... [#113241]
      By: Les (7233 comments) Go to top ↑

      Deron, enjoying the preview published in Amazon. RSI in tandem with A-D is a particularly useful indicator setup (p.63-64), as I’ve often had to grapple with false signals, yet unsure how to negate them.

      Ideally I’d like to master day trading with Vad’s setups and plough some profits into longer-term trades. Given that from an initial read your book is looking like Farley but more intuitive (It’s very easy to read, see the diagram and understand the setup you’ve used as example) with the modern ETF as focus (an intelligent way to profit from big money sector movements), I’m interested.

      Thanks for your efforts

  17. Miss you guys, and hope everyone is making great trades and... [#113234]
    By: baz22 (2875 comments) Go to top ↑

    Miss you guys, and hope everyone is making great trades and investments..

  18. I've had a few TBT calls for a few days. I'm looking at TLT... [#113238]
    By: ea32da32 (2362 comments) Go to top ↑

    I’ve had a few TBT calls for a few days. I’m looking at TLT for a setup, bounce off or undercut the 200dma ~$120.60 area for a possable double bottom I’ll look to dump the TBT calls and take a long position on TLT – it’s just a ‘plan’, of course Venus must continue singing the praises of the Moon, Vesta, Mercury and Pallas… LOL;-) just kidding.

    good night all,
    Earl

  19. How many extra-legal drone assasinations till you have to... [#113239]
    By: jock (1011 comments) Go to top ↑

    How many extra-legal drone assasinations till you have to turn back your prize?

  20. http://www.abc.net.au/news/2012-09-13/fortescue-sh... Not... [#113243]
    By: Les (7233 comments) Go to top ↑

    http://www.abc.net.au/news/2012-09-13/fortescue-sh

    Not sure, but anecdotal evidence suggests China has softened considerably, to the point that debt ladened iron ore miners in Oz are seeking creditor relief.

    http://au.finance.yahoo.com/q?s=FMG.AX

    Now 50% off from the top in April. Is that a good deal? Me thinks not. Will global monetary easing kick in to relieve companies of their poor financial decision making?

    I notice BHP breaking a downtrend line of resistance that extends back to early 2011.

  21. ... [#113244]
    By: Les (7233 comments) Go to top ↑