Friday, May 24, 2013

SAN May 24 2013

SAN May 24 2013
SAN Daily Chart May 24 2013

How you feel about SAN here is going to depend, most likely, on how you feel about the prospects for the broader market. If you think the little correction we have had will lead to buying, SAN is perfectly positioned at the bottom of its uptrend channel for a low-risk pick-up. Just put a stop right below the channel and see what develops.

This is a long-term play with a healthy dividend, best for retirement plans. You can trade it, but you'll need patience and have to account for the dividend. One way to get the dividend, which increases your return, is to receive the scrip shares SAN issues. As one of the largest banks in the world, diversified globally, SAN is the equivalent of Citicorp in the States. Those types of stocks can languish for long periods, but they usually recover at some point because they have real value.

SPY May 24 2013 Memorial Day Weekend

SPY May 24 2013

Futures did their little re-test of the Thursday lows, as we thought they might, but that level held like a champion. Since it did not break, that was a signal to go long for those who were watching.

Futures ramped into the close - lots of disappointed Bears covering, no doubt. The forecast is still sunny, with scattered clouds, mild rainfall and new highs in the 10-day extended forecast.

Below, as a bonus for those who follow this blog, is a look at the 4-hour futures chart with a 20-period moving average. Note how nicely it rides that band, up and down. If we get a crossover on Tuesday, as looks likely, that is a time to go long if you aren't already.

Futures 4-hour chart May 24 2013

The storm has passed, it appears. Futures re-open at 5 p.m. CST Sunday.

Thursday, May 23, 2013

SPY May 23 2013

SPY May 23 2013

First, I want to say that I do this for a living, and I don't post charts to pat myself on the back. I couldn't care less about that. It's about making coin and trying to form something coherent out of sheer chaos. My belief is that the individual trader is way outgunned by the robots and the programs and the instant access of the large brokerage houses. I think something should be done about that, but that's a rant for another day. We should try to help each other.

As I was thinking a couple of weeks ago, we did get to the vicinity of 1700 - ok, it was 1690, hate me for being off by 10 points, but that's close when I was saying that around 1630 - and then pulled back. Yes, we just had a big, scary pullback, just as they all are (actually, I expected a lot worse). Our goal now is to try and figure out what it means.

First, all the underpinnings of the previous move higher remain intact. QE in the US remains in place, QE in Japan remains in place, the Europeans are still looking for a way to join in so as not to get left behind. Nothing that Chairman Bernanke said yesterday was particularly new, and we already knew that not all the Fed Governors approved of all this stimulus. "Tapering," the new buzzword, is inevitable, just inventing a word for it and saying it will happen doesn't change the current reality.

Since the fundamentals haven't really changed, we are free to do a pure chart exercise - that's what charts are for.

Note (in the chart above) that we got to the top of the steep new uptrend channel and pulled back. I wouldn't put it past the programmers on the Street to have put that specific topping number - 1690 - in their robots because it was a nice round number and also the top of the channel. Prices got there, and the sell programs kicked in. No, I don't have any proof whatsoever that was the case - it's just a hunch.

We pulled back to the bottom of the new uptrend channel yesterday, then this morning broke below the bottom of the channel. That's pretty typical, how else are they going to scare you out if you're long? The mighty channel has been breached, run for the hills and stock up on water and canned ham! The important thing, though, is that the market sold off, as everyone expected, but then bounced, right back to (in the futures) 1650, where we ended the day.

What does today's bounce mean? I will give you two hypotheses:

1. It was the usual buy-the-dip crowd. In the past, they stayed on the case relentlessly and drove the market to new highs from there.
2. It was merely a Fib bounce, a "dead cat" bounce. I drew that out on the chart below (note that it's the futures).

S&P Futures (ES) May 23 2013

This is the point where you have to do some thinking. In normal markets, we would get the dead cat bounce and then roll over. That's why the Fib Retracement theory became popular in the first place. It worked. In the chart above, we didn't quite get to the normal 50% level today.

This isn't a normal market. Every single big, scary dip has been met with serious buying after a day or two or three. As I noted above, all of the previous fundamentals remain in place. So will this time be different? We could go down again tomorrow as a re-test, and still bounce back up. I'm not predicting that, and don't expect it, it's just a possibility.

You decide for yourself. I'm hardly infallible (geez, I wish I was), but I expect to see more new highs. I would look at today's low as the key level. Break that, we head straight for the 1500s. Otherwise, higher.

Tuesday, May 21, 2013

SPY May 21 2013

Today was a quiet day in the market as traders continue with their case of the nerves as seemingly every Fed President running loose in the wild is getting his two cents in about what is going on with QE. We already know, of course, because Chairman Bernanke has told us - they are continuing QE but may adjust the amount up or down as conditions warrant. The market is like a spoiled child right now that needs reassurance on this every week or two. Tomorrow morning, we get the usual reassurance from Bernanke.

So, you no doubt are wondering, what happens if, instead, Bernanke decides to spank our complacent butts and says something like, "I think we've had enough QE. In fact, I'm going to put on a hair shirt and join a Monastery." Well, we sell off. Very simple and clean. I imagine we would lose 75-100 points on the SPY within a few days. I'm sure that Bernanke knows this would happen, too. I doubt he really wants that to happen. So they will be subtle and mysterious about QE until, one day, they say, "Oh, by the way, QE ended three months ago." The market might hiccup, and then laugh.