Monthly Archives: July 2011

Deal or No Deal -Debt Ceiling Edition- $SPY

Posted by Investing Freak on July 28, 2011
Market Analysis / 2 Comments

     The US Debt ceiling could get hit on August 2nd which is 3 business days away. While everyone is struggling to make ends meet, Wall street and Pennsylvania Avenue are business as usual. Wall Street wipes out retirement investments and retail investors while our Elected majesties play games with each other like they are in kindergarten and whoever wins the argument gets a prize.

     Wake up because the time to act has passed. Instead of throwing money to bail out banks, and prop the markets for the past 2-3 years (Bubble 2.0) we should have let the “economic collapse” happen and now we’d be either in a hot burning inferno or on a better stage to recovery Worldwide.

Deal of No Deal

     A week ago S&P rating agency warned that the USA could lose it’s AAA debt rating if things weren’t solved for a better fiscally sound future, just today S&P said that it will not likely downgrade US debt rating. BULL$h!t we know full and well that with or without a debt resolution in the next few days that our rating will be cut one way or another. If it’s not S&P it will be Moody’s etc, these rating agencies are the ones that allowed things to get here when they rated the Credit Default Swaps & junk bonds safe and apparently it was blamed on a “programming code mistake” of sorts.

     If we do not reach an agreement on the debt ceiling the economy will go in a tailspin. Stock market will head to the south pole for the economic ice age, USD $ will be worth less, imported goods (Yes Chinese lead painted toys, middle eastern oil and the goodies in between) would become more expensive, US consumer spending would halt, US workers, contractors, aid for people, road work etc would be at a stand still and no money would be moving much if any at all. Unemployment would rise higher, banks would loan no money as they seek to avoid risk and stay liquid. And with a downgrade in our rating which is a no-brainer that would mean we’d have to pay higher interest on future debt we incur (Look at Greece interest rates on debt spike at downgrades, that will be the same here).  Anyways that is the doomsday scenario but right now we can do nothing but stick a fork into each politician and have them for dinner when we can’t afford food.

Take a look at how all this money came to become the $14 trillion+ debt.-Click to Enlarge– or go to NYT article

Whats in it for me?

     Lets take a quick look at how the market might be affected by this uncertainty,  but the obvious thing is most of the stocks will head down because on the 10-K SEC filing of every company one Risk factor is “Economic Uncertainty”.  Two weeks ago I posted the chart of /ES saying that it looked like a head and shoulders formation. This time the chart has the fib retracements that were drawn on a Monthly chart spanning back 20 years and drawn from major peaks to major troughs.  The ratios are hard to see but you will immediately notice where a lot converge.

So here we have a market that wants to hit 1250-1268 area in initially but ideally the 1225 in the very near term is last resort for support and thats 70 points below as of this writing.  Lets see what our knuckleheads do today, most likely nothing as always.

 

Possible downside trades would be SPY put options or buy SH shares for a hedge (SPY inverse)

Happy Trading,

K

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$SPY $/ES – Head & Shoulders (Knees & Toes) Pattern emerging

Posted by Investing Freak on July 12, 2011
Market Analysis / 2 Comments

The past week or so we expected an oversold bounce and now that it has come and gone more contagion fears have emerged, this time in Mario & Luigi land that makes pasta, pizza and tomato sauce along with the cheeses.

This latest fear-mongering along with recent economic data in the US and worldwide( which have been less than expected) and also the upcoming U.S. debt limit crisis which will get resolved (just not until it has hurt a good chunk of the economy) but not in a timely manner because like their waistlines, Americans cant/don’t like to curb their spending.

 

I was looking at my favorite time frame, the Weekly and on the futures I noticed an early stage but possible H&S pattern. Here it is simplified for your enjoyment, voice in your ideas in the comment box.

Positions: Rolled a July put into a September put.

I was right just not satisfied after the 8 day rally which reignited at the green moving averages above (risk reward wasn’t there anymore but I was high on “hopium”)

 

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Market Analysis: Quick look at potential $/ES price target

Posted by Investing Freak on July 02, 2011
Market Analysis / Comments Off on Market Analysis: Quick look at potential $/ES price target

Quick Trivia, what $/ES price target has been touched two dozen times in 5 years?

Answer comes right after a brief chartology interruption.

 

Let’s Have a look at $/ES on weekly chart from 2006-2009 and count how many times we touch a certain area (I should have initially hid the price on the chart to make it more fun).

I have even made it easier for you by placing bright green dots on it. The answer is 19 times. Ok so big deal… why does this matter? Follow me on a journey below this chart.

The last time this number was tagged or gotten close enough to was in April of 2011 at 1373.50 high which led to the correction of over 100 points (of which we have now regained 70 of them again). And so ladies and gentlemen If you checked out the comment in the previous post where I wrote that any shorts should have covered at $131 latest before the melt-up really heated up then you are either sidelined or took a small long position as not to miss the action.  This leaves us to tonight’s Trivia Target answer which is (rounded) $1375 for possible resistance and last refueling station for future space explorations.  Click to Enlarge as the preview looks blurry.

If that oil runs out then Houston to earth Houston to earth do you copy? we are coming down right over the Mediterranean sea. Yeah the European debt crisis is what I meant, I feel the need to explain it because I think faster than I type (who doesn’t) and don’t want readers to get confused.

So there we have it. Should be some light trading weeks coming up volume wise and the 1375 might not be out of the question if not more. I’d take off some longs near that level and let part ride.

 

Have a Happy 4Th of July weekend to those that celebrate it (Americans) and good night to the rest of my world readers.

 

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