Final Run of the Bulls, You Can Hear the Salmon, Let Gold Be Your Guide and Crude Goes

Yesterday was a macro disaster for stocks. It was a bullish day, but damage in commodities and bonds signal this rally is running out of fuel. Going to run through a lot of charts today, all after the jump. 

For myself, I am always early. I closed out the biotech trade when it got into that consolidation range. I had July puts so it wasn't a bad trade, but then I also closed SMH calls and they've run as well. I've done fine with other positions such as short oil, long treasuries, and long yen, but I say to this to be clear: my WAG targets for the rally initially were 25 percent for Nasdaq and around 2000 on the Russell 2000 as my charts show. They might get there and that is a risk for bears. 

That said, I'm buying puts here for September and October. I have a big "crash" trade on FCX and I'm looking for more trades like that. If Apple fills its gap, I'm really not kidding when I say that's a retirement line. I'm going all in at that point as long as nothing has changed to shake my outlook.

On to the charts.

Bonds tested the breakout and started moving higher. I'd prefer they clear the horizontal as a clearer signal, but buying the dip yesterday was a good trade.

The major indexes. Nasdaq is less than 6 percent away from a 25 percent rally. It probably won't go in a straight line, but if it did, it might only be days away from topping.
I slightly adjusted my WAG line on the Russell 2000 by moving the turn back into August. I didn't adjust the peak level of 2000.
The S&P 500 Index is lagging as is the DJIA for good reason: they didn't fall as much and this is a bear market rally. The S&P 500 is in a resistance area, but I don't think it is the leader. The Nasdaq and Russell 2000 are leading and they will tell the tale. That ES is at resistance isn't significant to me, although a reversal from this area would be signficant for tactical trades since the Nasdaq and Russell 2000 have broken above it already. Finally, if the DJIA rallied 25 percent off the low, it would be at a new all-time high.
Heres's the four indexes on a percentage basis from the June low.

Let gold be your guide. Gold is one of the most hated assets in the market and most of the people who love it hate it too because it never behaves. I love gold because it is a great forecaster. I interpret gold as sniffing out the rally in long bond and the Fed's unfolding disaster. Newmont Nov $55 calls are still attractive for a conservative trade. 
I couldshow many charts for the macro disaster, but I only need one: the accelerating inversion of the yield curve. This will be in early 1980s, worst recession since the Great Depresion territory withing days at the current rate of decline.
Finally: if it doesn't rally back, crude is done. The 2008 analog is about rage. If you have a hunch about a commodity trade going down bigtime, I'd take a flier on it.
I have many profits from XLE this past 9 months, will she be back in my arms again? Break the green neckline, go to the green target.

No comments:

Post a Comment