Weekend Update 2 – Patience will be key

I am going to present you with some charts of the VIX, QQQQ, SPY, DIA, and the IWM.  They represent the Magical Hedging,Nasdaq 100, S&P 500, DJIA, and the Russell 2000 in ETF form.   The VXX is the ETF of the VIX, we use $VIX since the VXX is a failure of reasoning and good sense.

My thesis is that the markets are in a state of flux / balancing / correction. Currencies will continue to be volatile, corrections will happen.  This one may last for a few weeks or it could already be over and some sectors just overshot a bit on panic.   @stockdarts posted a blog a few weeks back saying 'lock it up'; not looking too bad now.

I am sure there are a lot of good traders got hit hard last week, nothing was making sense. Why isn't everything going up?  I heard someone say that its 'not the reality of what is happening, it's the reaction to the reality'. That's the key distinction.  Whether it's fear or greed, if you have 50% profits, "LOCK IT UP".   The moment you overextend or show any form of emotion the markets will humble you.

Begin rant for the day. I trade futures intraday only.  I have no real concern for where the market or economy is going long term.  I could care less about GOOG, CMG, or the condition of Steve's cancer from a trading perspective. I trade the chart as it is presented to me each day during market hours. Cold and heartless? No.  Why?  Because the market does NOT care what you and I think.  The market discounts for me, price tells me what I need to know.  If I wake up tomorrow and there are turds in the sky and everything has gone to … well you know..  and I think the market should go down.  Guess what, chances are the market is going to go up because it doesn't care what I think it should do.  Besides doesn't every turd have a silver lining? End of rant for the day.

And now back to our regularly scheduled correction. The thing that will interest me here is how fast and hard the dip is bought.  The plan of attack has been the same since 2009, is it about to change?  Will Joey Diphard buy the dips hard?  Fed POMO may end in June, market is forward looking by 4-6 months, that isn't much time, if it hasn't ran out already.  I think the economy will be able to stand on it's own if the U.S. and the world can get a plan in place to deal with the debt.

On to the vigorousness. Yes, its a noun form of vigorous. Google is my friend.  noun:  "A quality of active mental and physical forcefulness"

What will be the moral of this story?  Patience.  I will wait til the market shows its cards before taking an stock swings in the retirement account. Not saying I won't trade, but I may be eating $5 subway instead of steak for a week or two.

 

Remember the /TF chart I posted last week.  It was 7 days up, 2 days down to support.

And here is a 60 min going back to 12/16 – If we sell this week, 765 and lower is in the cards.

 

Let's start it off with signs of hedging. The thing that isn't anything, but everyone looks at it. The $VIX is … tepid.  Some lows that we bounced at in Dec, check.  Markets are resistance, check.  Calculated Hedging, check.  No Panic, except for retail traders, check.  I wonder what a correction smells like ?  I love it when people apply technical analysis to the $VIX, also will result in self fullfilling prophecy fail type awesomeness. 

Hmm .. Daily.  Check.   No Panic.

Weekly.   Bounce 3 times in this area, pre-crisis and post crisis. Check. No Panic.

 

 

Weak but holding the 20 day, 50 day is an easy target.  AAPL has so much wieght that an AAPL & GOOG combo punch could definitely hurt the NASDAQ 100.

Held the 20 day and has rallied.   Continued weakness in tech will test this again in a hurry.  The last correction took us to the 50 day.

 

Strong, IBM bolstering the 30 stock stocks, in the same way AAPL is weighing on the NASDAQ.  Last correction to the 50 day, and a bit more.

 

 

Here is the kicker, we lost the 20, and need to support the 50 day, or else it gets ugly in the small caps.  This is new weakness in relation to the last correction, 50 day must hold.

 

So what we are seeing is a mixed signal, I am going to throw out the DIA strength, because I am a DOW Thoery guy.  I believe the Dow Trans gives os a clear picture.  Again the 50 day must hold.  So, with the Baltic Dry falling, dragging names like EGLE, DRYS, GNK, and EXM down with it.   Short term is ugly for these shippers and transports, longterm somebody has to ship resources to China.

 

 

Baltic Dry Index is heading to 2009 levels ?!  

 

 

Let's not forget the $UTIL, at resistance.  This is one to watch for weakness.  If we get a broad roll, you either step aside, take the heat, or get short.

 

 

 

Let's go over some commodities.  I'll start with GLD and SLV, gold and silver respectively.  I am not going to go into any detailed analysis, commodities correct exhuberance, it's what they do.  Are we going to the 200 day?  I don't know.  I sure hope not for those of you invested in stocks. If all hell breaks loose in the metals, you may as well find a bomb shelter.

 

 

 

Oil is inflation and manipulation.  U.S. summer season is coming, refineries will need to 'switch' to summer fuels, here we go.

 

Nat Gas has been beaten down, and the next step was free.  I bought @ $5, and $6, will probably sell before the 200 day and re-evaluate.  Though UNG stinks, decay from holding the futures contracts.

 

I remain bullish on water. Why?  If you don't drink you die. You can live without gold, silver, oil, basically everything else; except for water. What I am not saying is buy this ETF, I hate ETF's.  I believe they were designed to do one thing, take your money with you knowing it. I say you should look into companies that are pioneering things like water treatment, or investing in water technology.

 

 

 

 

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