Silver Breaks Out to Close Over $30 & How I Am Trading this Move

Update - Dec 30, 3:40 AM EST:  No, I'm not nuts nor an insomniac.  Still posting from Europe this week where the market has been open in Germany for the past 40 minutes or so, and I wanted to provide a status update to what I wrote about below in yesterday's post.  Though the thugs at JPM did come in and try to take down the silver market at around 8:20 AM EST (yesterday), the silver bulls fought back and brought us back up close to the early December highs at $30.70, where we hovered for most of the day.  Fearing a big correction, I did end up taking 40% of my position in SLV Feb $32 calls off the table at a tidy 90% profit, leaving 60% in play should we get a further rise.  That looks to be the case right now, as silver started really catching a bid at the Europe open....putting in a new high of $30.88 just a few moments ago.  It's at times like these where I wish I didn't make the conservative move yesterday, but I'm still concerned that the manipulators will make one more serious raid on price before allowing us to cross into the $31's, so I'll be watching and waiting.

Here's a shot of the overnight action in Asia (5 minute candles), where price rose slowly and steadily throughout the session, and then the big pick-up when Europe opened. 

 Yesterday's original post starts below the line.  Good luck - SM.
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Silver has finally broken out of the bullish pennant that had been forming since price last broke over the $30 threshold, but we have yet to take out the intra-day high posted earlier this month at $30.70.

So has the next leg-up in the silver rally begun, or are the manipulators getting ready to stomp us back down?  I think the chances are 50-50 for both alternatives, but in the case of the latter, I would see support at $29.50 as another buying opportunity.  As mentioned in my last post, silver will continue to rise, as will most all other commodities....this outcome is virtually inevitable in the face of  Bernanke's current plans to continue printing money to seemingly infinity. 

A Long Over Due Update on Silver

For anyone who has been in silver for the past six months, you are currently riding quite the profit wave, so the Silver Surfer image to the left seemed somewhat appropriate as we proceed into the last two weeks of 2010.  The question, as usual, is what happens next?  Does the wave come crashing down, or does it continue to grow and develop momentum as it heads toward shore, ideally forming the perfect barrel that seems to stretch forever, providing those who caught it, the ride of a life time?  My money is still on the latter, quite literally, in fact.  Step inside for a recap, and decide for yourself.

A Brief Recap And A Good Laugh

The past few days have been pretty busy here at my day job, and with the holiday season upon us, my evenings have been more event-filled than they typically are during the week.  Needless to say, I haven't had as much time as I would've preferred to comment on the latest happenings in the markets and the economy...in fact, my time right now is also very limited, so inside, I'll give a quick run-down on the Euro, Silver and the overall markets, then finish up with a "must watch" video clip that will leave you chuckling...I promise.

2nd Week of December....Has a Santa Claus Rally Begun?

It's Sunday evening here in the States and the markets have already opened in Asia.  The Euro is currently trading higher against most major currencies, the Aussie Dollar and USD are both trading higher against the Yen, while silver continues to make new highs ($29.50 while I type) and gold remains over $1,400 as it positions itself for a run at new highs this week.  Nothing new or of any significance this weekend out of the Eurozone, and it looks like tensions in Korea have eased for the moment as the world press focuses on Wikileaks, and its founder, Julian Assange.  Meanwhile, 60 Minutes has just aired the latest interview with Federal Reserve chief, Ben Berananke.  I watched this interview and have a number of things to say, but I'll save that for a post later on in the week when the video is available to post as well. 

Despite a very negative turn on the unemployment front last week, Friday saw the markets all end on an up-note and very close to the 2010 highs, as day after day of $7 billion POMOs and hints of even more easing (dare we call it QE3?) hit the rumor mill and contribute to the "hopium" built rally.  So do we rally on into the end of the year, or are we heading for a fall?  With all of the global events influencing the markets, is it even fair to pose this question in such simple terms?  I'm not sure either, but I'll lay out what I'm seeing, and let you make up your own mind.

Look Out - Silver Could Go Parabolic Within Weeks

It's Saturday evening and I've spent the past several hours watching college football while catching up on the latest posts at my favorite blog sites.  On the football front, Auburn and Oregon have both claimed their spots at the BCS National Championship Game later in January, and Nebraska is tied with Oklahoma 17 - 17 in the second quarter of the Big 12 Championship game.  Even though my team, Southern Cal (USC), is under NCAA sanction this year (and next), I'm still a huge fan of college football, but I gotta tell you folks....I've been having a hard time concentrating on today's games, as the action in silver over the past two days has easily eclipsed the excitement on the field.   After everything I've read today, my $100/oz price might turn out to be too conservative by a factor of 5 or more.

A Look at Tesla Motors

For those of you out there who have never heard of Tesla Motors, they are a manufacturer of high-end electric cars.  You can take a gander at their website here if you're curious.  My interest in Tesla began earlier this year when they had their IPO on the NASDAQ.  It was touted pretty highly in the financial media, and in the first few weeks of trading, had a lot of volatility, making for good day trading.  When the price dropped below the original IPO price of $17 (bottoming out at $14.98), a really good friend of mine told me that he was going to buy the stock as a longer term investment, and suggested I do the same.   Normally, I don't buy and hold anything for very long, but I sure wish I would've heeded his advice this time.  Anyone who bought at a price under $18 has seen a 100% profit since summer time, with the stock hitting a high of $36 last week, and still trading over $32 now, though the past couple of days have seen some heavy selling, which is likely a dose of profit taking for those who were in since July/August.  The question now - are we seeing an opportunity to buy the dip, or should we be going short??

Obviously the Euro went Bungee Jumping, not Cliff Diving

Wow....I turn my back and concentrate on my day job for a few hours, and look what happens.  Complete reversal of the sell-off from this morning, and then some.  No time to investigate any further, but anyone day-trading the EUR/USD pair today could've made a killing going both ways.

The Euro - Going Cliff Diving Again....

The market has been waiting all week to hear what ECB president Trichet would have to say this morning regarding the potential for a Paulson-style monetization of European debt.  The rumor mill was tossing around the potential for a trillion Euro + bailout...

....and this still may be in the cards at a future date, but as for today, no mention whatsoever, and the Euro is getting jack-hammered as a result.

Mid-Week Update

It's been an interesting week thus far in some markets, and rather ho-hum in others.  The the funniest bit of commentary I came across was from one of the posts at zerohedge, saying something to the effect, "If you were long the Euro and short Gold, you were likely carted out feet first after these past few days".  How true.  I can't find the link now, but I'll post it if I do.  At any rate, the Forex markets have seen a lot of action, as have the precious metals, while the S&P remains range-bound between 1173 and 1200 as the bulls and bears fight it out.  Actually, I think it's more like the Fed fighting gravity, but hey...that's just me.  Charts and commentary below....

Silver - an Update to Sunday's Post

On Sunday evening, I wrote a short piece on silver that prompted a number of comments and several emails.  All of the comments and questions are good....even the critical ones by anonymous posters, so I decided to write this follow-up article to address everyone's points.

And yes, I still feel the same about my $100 per ounce silver call!

Euro Falling Off a Cliff

Remember a couple of days ago when I said that all is not well with Ireland, despite the relief rally we saw in the Euro?  Well the market is now in full agreement and has been all morning, as reaction to the Irish bailout over the weekend, coupled with additional uncertainty in Spain & Portugal, not to mention a very weak auction for Italian bonds at around 5:00 AM EST, have resulted in a veritable beat-down for the EU currency.  Currently trading at just south of $1.3100.   Charts are posted below....

Hi-Ho Silver, Away!

 Those who know me well have often heard me speak about precious metals, and silver in particular.  I have also mentioned a time or two that the silver market has been heavily manipulated, kept artificially low by the likes of JP Morgan and HSBC, who together, control 85% of the COMEX and London exchanges for this metal.  While I have mentioned these facts a time or two, I never really harped on them much because I didn't want to sound like a conspiracy theorist.  Well, the times do be a changing, my friends.  JPM and HSBC are now under investigation (finally!), the spot price of Silver is up roughly 50% since the beginning of September, and I think this is just the beginning of a much larger move.  If things continue as they have, I think we could actually see $100 per oz and perhaps much more.

Thanksgiving Week Update

I've been on business travel the past few days and have had limited time to trade or post, but so far, it has been a continuation of thebattle between Bennie B. and the rest of the world.  On the one hand, Europe is starting to seriously unravel while N. Korea lobs missles at S. Korea and China keeps blowing asset bubbles, all of which are putting pressure on stocks.  On the other hand, you have Ben and the Fed buying up Treasuries like they were going out of style, in a vain attempt to keep the stock markets rising and the dollar dropping.

So far, it looks like "the rest of the world" is prevailing, and with no more POMOs on deck until after Thanksgiving, it looks like we may end the U.S. trading week on a sour note.  Let's take a look at a few charts and see where we stand....

AKS - Getting Ready for a Big Move?

I wrote this post on Thursday and forgot to publish it, but the information is still timely and a play that I'm still considering for my own portfolio.

Last year around this time I made some fantastic profits (over 500%)  trading call options on AKS, as the underlying stock price traded from $15 to $25 in less than 10 weeks.  Since April, the stock has gotten absolutely hammered, currently trading around $13.20, but the charts are indicating a big move could be right around the corner, and the options are pretty cheap.  I know that it's going to sound really out of character, but I think I feel a bullish play coming on.....the set-up and my thoughts below.....

Quantitative Easing Explained

This video has been out for about a week now and has been making the rounds on various financial blogs.  Not only is it a humorous presentation of QE2, the explanations are provided in very simple terms, specifically for the majority of us out there who don't hold a PHD in economics. It would be even funnier if it wasn't true.  Please view and distribute to friends & family. 



To forward, you can copy/paste either of the following links into an email.

http://singlemalt-trader.blogspot.com/2010/11/quantitative-easing-explained.html

or     http://www.youtube.com/watch?v=PTUY16CkS-k

CNBC Headline: "Wall Street to Soar as GM Returns"

Welcome to the biggest pump-job of the 21st Century 

You know, it almost makes me sick to my stomach when I see headlines like this.  All week, the mainstream media has been talking up GM and their return to the stock market....like it's a good omen or something?  Hello???  GM was a poorly managed company that for decades produced sub-standard products by leveraging the half-hearted efforts of an insanely overpaid, union-coddled work-force.  Is it any wonder that they failed?   The fact that they were bailed out with our tax dollars is still a sore point with me, but to celebrate their return to the stock market like the homecoming of  a victorious General (no pun intended) borders on ludicrous.

Mark it down - SingleMalt is going on record saying that an investment in GM is a sucker's bet. 

Profit Taking and Reassessing

As the saying goes, no one ever went broke taking profits.  That may be true, but you can certainly sell yourself short by taking them too soon, and right now, I'm wondering if I did just that on my short Euro position yesterday.  Here's the thing, though.  I also try to maintain a level of discipline in my trading, which includes another old saying:  Plan your trade, then trade your plan.  So what was the plan?  If you go back a couple of days to this blog entry you'll see it.  My take profit target was the 50% fibonacci retracement at $1.3462.  We ended up reaching that target yesterday, so I hit the profit button.  

Below I'll provide a recap of the Euro trade, with a look at what was happening then and what we're seeing now, and my thoughts on the overall market via the S&P 500.

Lines in the Sand and Other Updates

Well it's only noon time, and already it has been an interesting day.  Today's POMO of $5 Billion, plus $7.9 Billion on Monday and $7 Billion on Friday brings us up to almost $20 Billion in new Ben Bernanke quantitative easing, something that he claimed was supposed to be driving the market higher, yet the S&P is currently trading at 1175, down significantly from Friday's open at 1209.   It is way too early to gloat, but I do need to chuckle a bit at the CNBC pundits who were recently squawking about how the market couldn't do anything but go up from here.  And to be clear, we could very well still see a nice Santa Claus rally into the end of the year, but short term, we may be seeing a bit of that sell-off I thought would be coming, post the Fed announcement on 11/3.

Euro Update

Earlier this morning I posted on a number of things, including a current EUR/USD short position that I'm holding.  I got a comment from someone asking what my take profit target is for this play, and since I can't post charts in the "comments" section of the blog, I'm providing this update. 

Below is an updated daily chart, and you'll see where I've added a fibonacci retracement grid to the run-up that began in September.  We've been hovering around the 38% retracement for the past few trading days, and my initial thought when re-entering a short position here was to target the 50% retracement level, which would net me another 300 pips in profit. 

As can be seen in the above, we'll probably see some central bank buying to defend the intermediate lows put in last Friday at 1.3573, but once we break through this level, we should see 1.35 and below in quick time. 

Below is the same, but on a 5 minute scale, highlighting the action from today.  As you can see, 1.3580 saw some buying to put a temporary halt to the sell-off that began 2 hours ago.  I'm not sure how aggressive this buying will be, so have moved my stops now to 1.3650, just in case the ECB is feeling froggy and wants to jam the shorts. 

I'll update more later if I see any significant changes.

The Week Ahead

More questions than answers, I'm afraid.  The economic data being reported this week is pretty light, which puts QE2 squarely in the spotlight.  Last Friday's POMO was the first $7 Billion injection since the Fed announcement on November 3rd, and much to the dismay of Big Ben Bernanke and the POMO bulls, it was pretty much a flop - at least in terms of being able to drive the market higher.  In this post we'll take a look at:

1.  The S&P 500

2.  A few currencies

3.  A quick look at Cisco, post earnings

Then wrap things up with what we could see in light of ~$25 Billion in POMO, the continuing situation in Europe, and of course...the much anticipated IPO of General Motors later in the week.

QE2 vs. European Sovereign Debt Crisis

"Luck O' The Irish"  I've been talking about this for a few weeks now, and in yesterday's post highlighted the blowout in spreads for Irish sovereign debt.  Below are just the headlines from RAN Squawk, and I would expect that we see more follow-up from Bloomberg, Reuters and CNBC later in the day.

Last time this happened with Greece, we saw the Flash Crash and several months worth of selling.  Will that happen again?  Not if Ben Bernanke and the Fed have anything to say about it.  First POMO of QE2 should now be in process, with $6 - $8 Billion ready to hit the markets later this morning from the primary dealers.  Will be interesting to see how this day ends....markets are all in the red and at low of day as I type....

11-12 10:17: Bunds fall on RTRS reports Ireland to recieve emergency funding from European Union

11-12 10:17: Eurozone sources say assistance to Ireland does not foresee any debt restructuring or 'haircuts' for bond holders

11-12 10:16: Eurozone sources say 'very likely' Ireland will get EU financial assistance programme

11-12 10:15: Eurozone sources say Ireland in talks to receive emergency funding from the EU

A Storm Brewing for Equities?

I don't have a lot of time to post today, and no, I'm not forecasting a crash, but I did make mention of a couple things in my last few posts that could throw a monkey-wrench in the works for those who are convinced that the latest Ben Bernanke cash injection makes this a zero risk, stocks-can-only-go-higher market.  One point that I was very clear on, in fact my whole post was on the topic:  it is all about the dollar.  If you aren't keeping track, the dollar has been rising...across most currencies...for pretty much the last 4 or 5 trading sessions.  Yes, I know, 4 up days does not a rally make, but considering how badly the dollar has been trounced for the last 5 months, it bears watching.

The other thing I cautioned everyone on was the situation in Europe, in particular, another blow-up like we saw with Greece earlier in the year.  Well look out, because Ireland is back on the front burner with their sovereign debt spreads now blowing out at a record 700+ basis points to the Bund.  At that level, there are only two possible outcomes - sovereign default, or bailout....and likely within the next 5 trading days.   The Euro has been getting hammered as a result, down about 600 pips since last week against the USD.   Keep an eye on the Ireland situation, and the next domino, Portugal. 

If that wasn't enough, Insider Selling hit an all-time high this past week, as corporate officers and execs exercise their stock options and dump shares worth $4.5 billion...click here for the ZeroHedge piece from earlier today.  To be clear, this alone doesn't mark the top of a market, but I'll leave you with this thought.  If Bernanke's QE2 is really going to make it impossible for stocks to go down, why are CEO's and senior executives cashing in their shares in such quantity instead of riding the wave of supposedly guaranteed profits?  I don't know either, but it's certainly enough to give me pause.  Whatever the case, QE2 officially begins with tomorrow's POMO, $6 - $8 billion in Treasuries on deck, with $110 billion in total to be monetized between now and December 9th.

The Elections and QE2 are in the Bag - What Now?

From Phil's Stock World - this pretty much sums it up....

"After putting over $2Tn into our Dead Parrot Economy since the crash and getting no response, Bernanke is upping the ante with another $600Bn round of Quantitative Easing ON TOP OF the ongoing $250-$300Bn round of POMO commitments for a total of about $110Bn per month dumped into the economy between now and the end of Q2.  This represents a 10% increase in the money supply over 8 months and, therefore, a planned 10% decrease in the purchasing power of your dollar-denominated assets or, to put it bluntly – a 10% tax on everything you own.

That is the joke of this country.  People sit there arguing about whether or not to extend a tax cut that will cost 3% of a year’s salary while the Fed, with no electoral oversight, is simply taking 10% of your LIFETIME savings – AGAIN!  They did it last year, they did it this year and now they promise to do it next year too.  That’s 30% folks! "

What can I say?  He's absolutely correct, and the sad part about it is, most Americans are completely oblivious to this concept. 

QE2 - Today's the Big Day

Well, there is QE2 and then there is The QE2....I think the one pictured here to the left is infinitely more desireable, but the consensus opinion is that Bernanke's version of QE2 is all but guaranteed later this afternoon.  The only question remaining is how much will it be?  Consensus seems to be leaning towards $500 Billion over the next 6 months, or just shy of the $100 Billion/month that I spoke about in my previous post, but keep in mind, QE2 is incremental to any POMO activities, which have been going off at a rate of $20 - $30 Billion per month since September, and are expected to continue in the near future.  

So what are the implications?  

It's all about the Dollar

Greetings all and apologies for the lapse in posting.  I had intended to write quite a bit last weekend, but the weather was so spectacular that I just couldn't bring myself to spend time indoors.  Then during this past week I've been on business travel, and simply haven't had the spare cycles to do much more than check the markets and manage a couple of positions. 

At any rate, let's take a look at how things are shaping up - the title of this post really does say it all.  Ever since the beginning of September, it has been all about the US dollar, and specifically, how the world perceives the Fed's actions related to the dollar.

CNBC produces a clip worth watching - The $150,000 bottle of Dalmore

"The 64-year-old Dalmore Trinitas, costs $150,000. That's about $32,000 a glass.    How good can it be?  'The Dalmore 64 tastes like purple heaven,' said master blender Richard Paterson, whose nose for whiskey is so attuned to the nuances of scents that it's insured for $2.5 million by Lloyd’s of London." 

So if anyone was struggling with that perfect Xmas gift for SingleMalt, your troubles are over.

Good News, Bad News....Does it Matter Anymore?

Yeeeeeeeee-Haaaaaaaaa!!!!

After a slew of negative economic data stocks ended the day almost flat.  The DOW was down just a point and a half, while the S&P was down 4 due to weakness in the banks.   

So why didn't we see a sell-off today?  Because Uncle Ben has made it all but illegal for the stock market to go down.

Revisiting Intel and a sudden return to POMO

If you read my post from this morning, you know that I wasn't buying the hype surrounding Intel's supposed "better than expected" earnings report....click here if you haven't already read this morning's post.  I was actually planning on waiting a week or two before posting on Intel again, but after today's action, we have a pretty good set-up that's worth reviewing.

Earnings Shenanigans Continued - the JPM Version

JP Morgan was the first of the major banks/brokerage houses to report earnings this morning, and once again we're getting an incredible spin job in the media because Earnings per Share (EPS) came in at $1.01 vs. an expected $.88 per share.  But wait a minute.....If net revenues are down by over $1.2 billion from Q2, and down by $3.4 billion compared with Q3 2009.... how is EPS coming in higher than expected, and what is there to cheer about???

Earnings Shenanigans Are Upon Us Again

Anyone who knows me or has read this blog a few times knows that I'm a pretty regular CNBC basher.  There are actually a lot of good reasons to bash CNBC, but since it's early and I'm too lazy this morning to list them all out, let me just show you the difference between non-biased reporting and what I like to call the CNBC propaganda machine.  The Intel earnings report makes for a great example.

#2 in a Series on the Mortgage Foreclosure Fraud - An Interview with Janet Tavakoli

From the interview:

"This is the biggest fraud in the history of the capital markets."

"The financial crisis was a product of our irrational reaction, which protected crony capitalism rather than capitalism. In capitalism, the shareholders who took the risk would be wiped out and the debt holders would take a discount but banking would go on."


Janet Tavakoli is one of the very few people in this country who not only had the brains to understand the complex topic of structuring synthetic financial derivatives like Collatoralized Debt Obligations (CDOs) and Mortgage Backed Securities (MBS's), but who also had the courage to raise her voice in warning of the systemic danger these types of derivatives could bring to the market if they continued to be created and traded in a completely unregulated fashion...and this, way back in the early 2000's.  These MBS and CDO products are one of the core issues at the center of the current foreclosure mess, but of course, back when Janet was warning anyone who would listen, no one in the banking industry or Congress gave her the time of day....they were all too busy getting richer, and now we, the citizens of the United States, are left holding the bag.

#1 in a Series on the Mortgage Foreclosure Fraud

Below you will find a very informative video clip from MSNBC's Dylan Ratigan, one of the few financial reporters in the main stream media who isn't bought and paid for by the corporate complex or the Wall St. lobbyists...hence why he no longer works for CNBC, but that's another story for another day.  Getting back on point, this video provides a very clear description of what is happening related to the foreclosure mess that has suddenly become a hot topic over the past few weeks.  The clip is 12 minutes long, but I highly encourage everyone to watch it in its entirety to see and hear for yourself why the banks have done what they've done (ah...profit & greed?), why the Government has done nothing about it (ah...so politicians could stay in office?), and what the potential ramifications are (depends on what, if anything, the Government does now).

Taking a small short position into the close

If you scan the blogs and business media sites, you see a lot of folks thinking that today's poor unemployment numbers are going to guarantee more Quantitative Easing by the Fed come November 3rd, and hence believe that a floor has been placed under stocks with no place to go but up.  That may end up being the case, but I'm not buying into it just yet.  I took a modest short position on the SPY right around 116.80 in the last 10 minutes of trading, and will stop out on a daily close over 170.50.  The 170 area should be a decent resistance point, so if we breach it and close above it early next week, it will be a sign that the bulls will likely take us back up to 1200, and I'm out with a small loss.  And just for the record, I did day-trade the bullish move up today.  Though a bear at heart, as a trader, you have to go with the prevailing winds, and today there were gale force gusts coming out of the land of the bulls. 

Have a good weekend all.  I'll be posting a number of articles over the coming days to help everyone understand some of the more serious issues that have been percolating in the media the past few weeks.

And the numbers are in - a big miss

NFPD comes in at -95,000 vs an expected -5,000 jobs for September.  The knee jerk reaction was an immediate sell-off, lasting less than a minute, then euphoria, as traders digested the news and realized that worsening unemployment raises the probability of additional Fed intervention in the form of QE2 in November.  Now the euphoria seems to have worn off a bit, and we're back down inside the range we were in prior to the announcement, and appear to be dropping.  Maybe people are finally starting to figure out that additional Fed intervention is not such a good thing after all????  Hmmm.....

Non-Farms Payroll Data (NFPD) On Deck

Well, I certainly over-estimated the bulls yesterday.  I guess there's only so much buying they can do when the POMO spigot has been turned-off.  At any rate, the big gap-up that we saw as a result of the better than expected unemployment report was immediately sold-off at the open, and after 10:30 or so, we basically just chopped around the rest of the day. 

Today comes the much anticipated NFPD jobs report at 8:30 EDT, and there has been much speculation in both the blogosphere and mainstream media about what the results will be, and how said results will impact not only the market action today, but what the Fed has planned regarding Quantitative Easing in November.  I'll probably post something on QE later this weekend.  For now, nothing much to do but wait and see the data.

The Bear Trap Has Been Sprung

As suspected in my post from two days ago, anyone loading up on shorts yesterday based on the CNBC.com article about a gloomy employment figure coming out this week are likely to get shanked at the open today.  Initial jobless claims came in at 445k, or 10k lower than the expected 455k, and we're now spiking in the pre-market as a result.

And as predicted, the CNBC propaganda machine was ready and waiting with this headline article [Jobless Claims Edge Down to Lowest Level in 3 Months] - gotta love the spin doctors!

But don't forget another one of my posts earlier this week [Market Manipulation Addendum] describing how the Bureau of Labor Statistics (BLS), the folks who report these numbers, have had to upwardly revise their initial estimates in 22 out of the last 23 reporting instances.  Well scratch that, and make it now 23 out of 24 because today's report also shows an upward revision to last week's number by 3k in initial claims.  Anyone want to take a bet that today's number gets revised next week???? 

And while we're on the subject, Reuters has an article out today entitled, [Job Losses in 2009 Likely Bigger than Thought] indicating that the BLS will likely be coming clean on watered down reports for all of last year as well.  Absolutely pathetic. 

As for today, let's see how high this surge takes us this morning.  If Alcoa meets or beats, we could see an additional surge for the bulls....but then I think the party is over.  More on that later.

A Little Comic Relief

It's Thursday morning and Q3 earnings season will officially kick-off with Alcoa releasing numbers after the opening bell.  Now that we have POMO behind us, at least for the next few weeks, it should be interesting to see how well the market holds up.  I think we should head down the rest of the month, but as I've laid out in previous posts, the manipulators have numerous tricks up their sleeve, so we shall see.  In the meantime, here's a clip that I ran across awhile back that seems all too appropriate for the times.  Enjoy!

Last POMO day

Has been  a busy morning so not much time to post.  Last hour we had the ADP jobs report that came in very negative:  -39k vs. +20k consensus expectations.  This brought futures back down below yesterday's close, and we'll probably see some initial selling at the open.  Barring any further bad news, today's $2 billion in expected POMO activities should be enough to keep the market up, but I wouldn't expect to see the huge gains we saw yesterday....never know, tho'.  

I do however think that we are at, or very near the top of the rally that started in Sept.  I may put on a few small short positions later today, but will wait until after Friday's Non-farms payroll data to come out before getting more aggressive.  As mentioned yesterday, I think we have a decent shot to see one more bear-trap via a manipulated NFPD report, so I don't want to get over exposed to the short side just yet.

All for now.  Good luck trading.

Wish every day was this easy

Based on the points outlined in my post below from this morning, and once we saw the ISM report for the Services sector come in "better than expected", it was pretty much a slam dunk that we were going to rally higher all day, so I loaded up with calls on the SPY, IWM and FAS at about 10:10 this morning, and traded out at right around 1:00 PM for a seriously good day.  Here's the thing with day-trading - often times, even the best set-ups have a pretty healthy dose of risk, and you end-up stopping out at break-even or a manageable loss, but every once in awhile, the market hands you a guaranteed winner (if you know what to look for), and today was one of those days.  It's almost like being one of those bankers back-stopped by the Government's too-big-to-fail policy.  You can leverage up a large position and really make a killing, because you know that Uncle Sugar, Benny B. and their Wall St. cohorts are not going to let the market drop today. Sure, I could've made even more if I would've stayed in until now (3:30 PM EST), but I had a target of 116 set for the SPY, and similar levels on IWM and FAS, so I cashed out when they hit.  There's another saying that I learned early in my trading experience - "Pigs get slaughtered!"  In other words, don't get greedy.  It has served me well.

On the downside, I just stopped out of my Amazon position a few minutes ago, but it was only a 50% position size to begin with, so the loss was small, and barely put a dent in the gains from today's trades.  I was clearly a bit early for my Amazon play, but I still like it, and will likely re-engage later this week.

Hope all of you had equally profitable days.   

Today should be an up day for the markets

After an initial buying surge in the first 15-20 minutes of yesterday's session, the sellers came in and took us down to bounce off that support line at 113.20 on the SPY (or 1130 SPX), which was the previous swing high from June.  After that, we basically chopped around the rest of the afternoon, rising slightly into the close. 5 minute and daily charts presented below for your perusal (click to enlarge).

After yesterday's selling, coupled with it being POMO Tuesday and a very light reporting day on the economic front (ISM Non-manufacturing data at 10:00 AM is it, I think), I would expect the bulls to ramp us back up to take back yesterday's losses at a minimum.  Wednesday is also a POMO day, but then that's it.  No more Fed liquidity injections are planned for at least the next two weeks, so I'm thinking that the party is over on this engineered rally by the end of the week, but more on that later.

Zerohedge also made a short post [here] yesterday that I don't quite understand. 

As circulated by a very prominent prime broker, the following names (and several others) might show up on buy-in lists tomorrow:  NOK and KLAC, but most notably SPY and IWM. As a reminder these kinds of broad index ETF buy-ins occurred in March and April 2009 when the market surged higher day after day without a care in the world.

Not being a Wall St. insider,  I'm not sure what this buy-in list referred to above is, or who gets it, or what, if any real impact it has, but thought it worth sharing.

As for later in the week, I think we could start seeing some significant selling, once Weds' POMO is behind us, but I would be careful about loading up on shorts prior to all of the employment data coming out on Friday.  I can't find the article now, but yesterday on CNBC.com they ran a headline article stating that there's good reason to expect that the jobs numbers coming out this week will be very poor.  When I see headlines like that from an organization like CNBC, who is usually the biggest cheerleader around, I start getting suspicious.  Sure, I don't expect that the jobs numbers will be very good either, but this sounds like another case of significantly  lowering expectations prior to the release of the report so that either (a) the impact of a very negative report is lessened (resulting in little market reaction), or (b) if the numbers are bad, but not quite as bad as what CNBC is expecting, it will be a reason to crank up the propaganda machine and pump the market again.  At any rate, beware of another potential surge to come, and of course, keep an eye on the news....as that (and the Fed) are the only things that are driving market direction these days.....certainly not company fundamentals or market technicals.

Good luck trading.

A few stocks

First an update on Amazon.  Last Thursday I mentioned [here] that I thought Amazon was looking good for a short entry, and on Friday things started heading in that direction with a close below the trading previous trading range support at 155. 

Unfortunately, my entry wasn't as good as I had wanted....I was hoping it would trade up to the top of the range near 160, but the stock started selling off immediately at the open, so I got into a 50% position on a bounce off the previous day's low on a bear flag pattern.  I only took a half position, as I thought there was still a chance we may have rallied back up higher in the range for another entry, but we didn't, so I'm holding the Nov 150 puts only.   The 5 minute chart from Friday is shown below with entry area shown. 

Now it's wait and see time.  Still looking for a drop down to 145 as an initial target, but since my entry was lower than anticipated, I'm bring my stop to 161 instead of 165.   If we trade down below 150, I will move stops to break-even.  The interesting thing for the coming week will be the POMO days on Tues & Thurs.  If the Fed injects another boatload of money into the system, we may see some continued upward movement, but as previously posted, the Fed's biggest Treasury purchases were front-loaded into September, so I'm not sure how market-moving these coming POMO's will be.  The important thing for anyone following this trade is to remain disciplined on your stops if Amazon gets ramped with the rest of the market.

And now a look at ISRG.  A friend of mine mentioned that he thought this was going back up to $400 in the near term, and since I hadn't looked at this chart in months, I figured I'd take a look see.  Daily chart below.

After reviewing and inserting a couple of trend lines, I'm not so sure I would agree that ISRG is headed back to 400 anytime soon, but who knows.  My main observation is that we are in a pretty defined downward channel going back several months on a series of lower highs, so that upper trend line will likely present stiff resistance.  On the bullish side, we could be forming the "b" dip of an ABC pattern, which would but C at 330 on a measured move - which would be a break of the upper trend line.  Bottom line I don't think I would go long at this stage.  A test of the upper trend line would make a good spot for a short entry, or if we trade down to the bottom of the channel again, I might look to go long on a bounce off the lower trend line, but I'm not seeing $400 at the current time.

Hope you all had a good weekend.  More to come later in the week.

Market Manipulation Addendum

At times over the past few months you have seen me post some minor rants when one of the weekly/monthly economic report comes in at "better" or "much better" than expected and causes a huge rally.  Then, a week or month later, that "better than expected" number ends up getting revised down, or up as the case may be, to the real number, which in fact only "meets" the original consensus expectation, or may even come in lower than expected.  Of course, a week or month later, that's old news, and when announced, we see no comparable selling.

Yesterday I penned a longer piece about our markets being manipulated and broken. Today, I make a quick call-out to the Government controlled reporting agencies who have been busy aiding and abetting the corrupt Fed and Wall Street bankers in their efforts to perpetually ramp the market higher.  In the spotlight today, thanks once again to the research of our friends at zerohedge.com, I present you with the Bureau of Labor Statistics, or BLS, which should now actually be shortened to simply "BS", after reading these statistics.  For those not aware - these are the folks who are responsible for tracking and reporting weekly/monthly initial and continuing unemployment claim data.

Most of you already know by now that the manner in which the BLS/Government reports unemployment as an overall percentage of the work force, significantly under-represents the true story (they publish 9.5%, but we all know it's closer to 20%).  This has even been reported in mainstream media and newspapers, so I won't go into that all now, but if anyone isn't sure what I'm talking about, leave a comment and I'll address it separately.  Today's topic however is focused on the published reports coming out of the BLS on a weekly basis regarding initial and continuing claims.  Full article from zerohedge can be found [here],  but the bottom line is, the BLS has misreported their initial claims for unemployment in 22 out of the last 23 published reports, and in all 22 cases, these figures have later been revised higher.  Clear text translation - in 22 cases, the BLS has reported initial unemployment claims being lower than they actually are, thereby attempting to paint a rosier picture of the economy.  Here's a nice little visual for you from the original ZH article.

Now riddle me this.....how long would you remain employed at your current position if you fucked-up 9 out of 10 weekly/monthly reports?  I mean seriously, most of us wouldn't even get the opportunity to reach 22 out of 23 times...so what are we to derive from this?  Either:

1.  Every single person within the BLS reporting chain is completely incompetent (possible, but not probable);

or

2.  The BLS is corrupt from the inside, and on their own, are purposely trying to make their unemployment numbers look better (again, possible, but not probable...after all, they're govt. employees and get paid regardless of the results);

or

3.  The BLS is being directed by the Administration, the Fed, Wall Street, or a combination of all three to purposely misrepresent their statistics.  In other words, to lie. Lie to you, lie to me, and lie to all Americans.  And why?  So the Wall Street crowd can goose the market higher on "better than expected" unemployment figures.

I'll go with option 3 above, and call it Exhibit 4 in support of  my broken, manipulated market thesis.  If you haven't read yesterday's post, Exhibits 1 - 3 can be found [here].

Good luck trading!

Amazon is looking tasty here

Back in late August I posted on Amazon, pointing out that it looked like a big move was coming.  You can click [here] to revisit the post, but below is what the chart looked like back then.

And here is how Amazon looks today - what a difference a month makes, huh? (both charts are clickable)

Talk about a parabolic move - that's almost straight up, and a 28% gain in less than 4 weeks!  Well friends and neighbors, nothing goes straight up forever, and while price seems to be consolidating between 155 and 160, I think this is a great spot to get into a trade to the short side, with a tight stop, should this move up not be complete.  I didn't show it on this chart, but the RSI and Stochastic have both shown over bought for weeks and are now descending, and the MACD also looks to be rolling over from an extreme high (all on the daily chart).

I will be watching price action in the morning to gauge my entry - ideally we will open somewhere within this current range, and I would want to make my entry as close to 160 as possible.  November 160 and/or 150 puts (the monthly options) are the play.  Stop loss would be if the stock trades to 165....small risk.  If you want to tighten risk further, you can buy the 170 or 180 puts.  The options will be more expensive, but the delta is higher and you won't lose as much if we stop out.  Amazon moves fast in both directions when it gets going - the past four weeks are evidence of that - so if we do start selling off, my first target would be 145 to take profits on at least 50% of the position. 

If we start the day with a gap-up over 160, or a gap-down below 155, I will likely scratch the play and re-evaluate...all depends on how things go after the open.

The reasons why this is a broken and manipulated market

Over the past few months since I started writing this blog, though I've made a conscious effort to try and keep my posts somewhat neutral, I've also been pretty clear that my bias is bearish.  So SingleMalt is bearish, yet the market keeps rising, or at least fails to fall.  Now SingleMalt says in the title of this post that the market is manipulated.  Is this just a case of sour grapes?  Is SingleMalt simply suffering from a case of hubris?  Well, allow me to present you with a few factoids, and then I leave it to you to draw your own conclusion.

Early morning thoughts

Well, early morning for the US folks at any rate.

Yesterday I was looking for some sort of direction into the close, but we ended the day with a fizzle, stuck within the same range previously noted.

On deck later this morning are the following econ reports with consensus expectations noted.

Thursday, 8:30am, Initial Claims 450K
Thursday, 8:30am, Continuing Claims, 4450K
Thursday, 10:00am, Existing Home Sales, 4.04M
Thursday, 10:00am, Leading Indicators, 0.1%

As usual, a big miss or big exceed on any of these reports will get the market going...at least short term.  Speaking of which, econ reports out this morning in Europe showed their PMI growth to be slowing much more than expected, which has the FTSE, DAX and CAC all down about .75%  as I type.  This in turn has driven down US futures. 

On the technical side, please refer to the chart below.

-click to enlarge-

As was pointed out yesterday, the thick blue line represents the June highs.  This acted as support during yesterdays session, but as you can see now in the pre-market, we are trading beneath this level (as a reflection of lower futures described above).  We still have over 3 hours to go before the market opens, so too early to make any real forecast, but if we do end up gapping down to start the day, I would look for the bulls to at least try to test this blue-line level in the first hour of trading.  The econ reports will set the stage however, so if you plan trading at the open, I would get in and out during the first 29 minutes, then get back in to trade the momentum move resulting from the 10:00 AM reports, if any.

Probably won't have time for any additional posts today.  Good luck trading.

Intraday update

Nothing too exciting happening at the moment.  The thick blue line is the previous high from June that is now acting as support (equates to roughly 1130 on the SPX).  As you can see, we've been meandering back and forth between this support, and yesterday's lows as resistance.  Should see some sort of directional movement come the last hour....I'm not trading today, so won't even try to guess at this point, but if we do sell off and close significantly below the blue line on heavy volume, a short play later in the week would be looking better and better.  Then again, the primary dealers are sitting on $2 billion from today's POMO, so a last hour ramp remains a distinct possibility.  We should see soon enough....

Another short update

Have a lot going on right now, but wanted to take a few minutes to sum up my thoughts regarding our current situation in the market.

-click to enlarge-

Just to stay consistent with my posts prior to my Germany trip, I've put up a follow-on SPY chart that I'll be referring to as I lay things out.

1.  Interesting FOMC reaction yesterday to say the least.  Not much was really said...i.e. no QE2 announcement, and no other really unexpected news, but the dollar started getting pounded almost immediately and the drubbing has continued through the overnight session into today - and this is across all currencies vs. the dollar.  Strange.  Sure the Fed said that they are prepared to provide additional support (QE) if needed, but they've been saying that for months now, so why did the dollar suddenly plunge across the board?  Not that I think the US dollar is anything to write home about these days...I just find it strange.  As a result, Gold has continued its climb and is now flirting with $1300. 

2.  So how does that leave things for the markets now?  Let's start with the bearish case. 
 - We saw a sell signal in the VIX a few weeks ago that is still active.  Click [here] if you need a refresher.
 - Though we saw a breakout above the June highs on Monday, as of yet, we haven't seen much follow through, and the volume has still been pretty miserable...on par with summer volume. 
 - The Stochastic is showing us as being over-bought almost the entire month of September and due for a correction.
 - Though we've seen some "preliminary" signs that some economic indicators have been improving recently, some of the biggies like the Philly Fed and Empire Manufacturing Index have shown continued month on month decreases, and in the Fed's comments yesterday, they too admit that any improvements we're seeing are coming much slower than expected, and marginal at best. 

On the bullish side:
 - We did finally break out of the multi-month range to the upside.  If the break out is for real, we could conceivably test S&P 1200 again this year.
 - As I've posted several times in the recent weeks, we are in the midst of QE-Lite, with Fed POMOs buying up USTs and providing primary dealers with new billions with which to ramp the market.  Click [here] and [here] if you need a review. 
 - We are seeing some technical symbols (see above chart) that seem to be confirming this move.  Though volume is low, at least it has been increasing, and we're also seeing the MACD putting in a new relative high confirming the new price high vs. the June highs.  While the Stochastic shows over-bought, keep in mind that we can stay in an over-bought condition for a long time while price continues to rise - see Feb - April in the above chart.
 - Mid-term elections coming in November.....a crash now wouldn't look good for the current administration. 

So that's how I see things in a nutshell.  Overall, I have to admit that my longer term bias is still bearish, but I am going to wait and see how things play out over the next few days before getting into any more swings.  A break of S&P 1130 to the downside would prompt me to revisit a short position, and if we can get above 1155, I may get long (for the short term).  Don't forget, today is POMO Wednesday with $3 - $5 billion teed up to enter the markets after 11:00 AM EST.

Good luck trading.

Pretty hilarious, and pretty sad...

I've been following Bruce Krasting's blog for quite some time.  I don't know him personally, but he writes well, and as a former Wall St. insider, his insights often bring a unique perspective to many of today's financial issues.  One of the areas he has covered in great detail is the current sad state of affairs surrounding our Social Security system.  His latest post [here] can be summed up in the title of this post...at least for me.  Take a look and draw your own conclusions, and if you have the time, skim through some of his archived posts...lots of good stuff. 

A quick catch-up

Hello all and apologies for the long hiatus.  As mentioned a couple of posts below, I've been on vacation in Germany for the past 10 days or so, and won't be back home until this coming weekend.  On top of that, several days worth of drinking German beer resulted in me forgetting my blog password....but now that I'm back to Scotch, my memory has suddenly recovered.

That said, I want to provide just a couple of quick updates.

1.  Stopped out yesterday on the small short position entered a few weeks ago when the SPX was trading at the top of the symmetrical triangle.   If you joined me, I hope you kept your position small, as I warned that if the bulls got some momentum going, it could get ugly for the shorts.  I was positioned in November deep in the money puts, so still had decent residual value left when I stopped out.  I didn't trade at all last week and have been pretty out of touch, so I need to get myself caught up on things and figure out my next move.   Will let you know soon.

2.  POMO is definitely the name of the game.  My last post before getting on the plane said that this could be a game changer, and so far, it definitely has.  Yesterday saw the Fed purchase another $5 Billion in Treasuries and we have POMOs on Weds and Fri of this week still to come.  I'll be posting more on this topic later in the week or early next week as time permits, but unless we get some really bad news from other areas, these POMOs should continue to propel the market higher....look for next resistance between 1150 and 1155 on the SPX.

3.  Today is FOMC day - 2:15 EST.  What the Fed says, and how it says it, could have significant impact on the markets this afternoon.  There was a lot of speculation last week that a massive QE2 would be announced this week...first an announcement by Morgan Stanley (MS) that QE2 was imminent, followed by a series of reactions in the markets....most notably the Bank of Japan's intervention on the USD/JPY pair, and of course Gold's new all-time high, then a follow-up announcement from MS that they were mistaken in their original prognostication...no QE2 to be announced this week.   So what's the verdict??  We'll find out this afternoon, but my guess is that there will not be a QE2 announcement....not while the S&P is trading at current levels.

4.  And last but not least....let's all belly up to the bar and have a celebratory toast to yesterday's news that the recession officially ended in June/July 2009.  I mean, aside from the fact that this news sound-byte was responsible for the rally of irrational exuberance we saw yesterday that triggered my stops, isn't it great to hear that all is now well in America?   Sorry, but what a crock of shit.  I don't know how things are looking where you all live, but I can assure you that things are not at all rosy in my neck of the woods....especially for small businesses, and I know a lot of their owners.  In fact, my Mercedes mechanic for the past 7 years will be closing his shop at the end of this month because business has fallen off a cliff.  Fortunately he is in the position where he can take early retirement, but had the economy remained intact, he would've preferred working another 5 years.  And let's not forget the ongoing record foreclosures and near record unemployment levels....but the Government says everything is better now.......so move along everyone....nothing to see here.....

This could be a game changer

Just caught this on zero hedge -

according to Morgan Stanley, the Fed will make sure that over the next three weeks hedge fund LPs are happy, that redemption requests are sparse, and that September will be an up month for all those levered to the hilt and chasing beta: for September/October the Fed is now expected to monetize double the amount of bonds in Aug/Sept. In other words, the Primary Dealers, aka Fed Lites, will be using tens of billions of brand new Fed printed money to chase the highest beta stocks they can find.

Full article can be found here http://www.zerohedge.com/article/fed-ramp-stocks-september-thanks-front-loaded-pomo-schedule.

Two or three posts down, I provided commentary on the Fed's POMO activities, and things like shown above are why I say that this is a rigged market and very difficult to trade on technical signals.  So bottom line, though the technicals are saying loud and clear that we should be moving lower, there's a very good chance that this extra liquidity injection will ramp us higher - just like we saw last year.   If you're swinging positions, keep them small, stay nimble and maintain discipline on your stops.  Things could really go either way right now. 

Good luck trading.

Off to Germany

Guten Morgen - I'll be off in the great State of Bavaria for the next two weeks with Mrs. SingleMalt.  I'll still try to keep up with things while away but if the posts come less frequently....below is one of the reasons why...

No - none of these pictures are of SingleMalt, but I'm thinking of changing my name to SingleHops for the next several days, as I'll be attending the Rosenheim Herbst (Fall) Fest, which is Germany's second largest beer fest, behind the Oktober Fest, which starts in another week or two.  Probably won't attend the Oktober Fest though...it has become much too commercial and crowded over the past 20 years, but if you've never experienced it at least once, you should add it to your bucket list.

As for the markets, my plan and positions haven't changed as of yet.  Will keep you posted if they do.

Auf Wiedersehen und viel Glueck!

The VIX is predicting another sell-off

I completely missed this over the weekend, but caught it during my reading tonight over at Zerohedge.com [click here.]  The VIX (Volatility Index) closed below the lower Bollinger Band again on Friday...a sign of peak complacency in the markets.  The last two times this has happened have been followed by spikes in the VIX and sell-offs in equities.  Back in April when this occurred, I bought out of the money, forward calls on the VIX and made 10x profits on my position within 4 weeks.  I will definitely be making a similar entry this week, but I'll warn you all right now, just because a technical sign has always worked in the past doesn't guarantee it will work again in the future.  Translation:  don't go fucking nuts with your position size.  This is just another trade, the same as any other trade you would make, so keep your money management principles firmly in place and manage your downside risk. 

-click to enlarge-

Off to bed now...good luck trading tomorrow.

I'm gob-smacked...

Well after I'll my ranting about POMO days in the post immediately below, the bulls weren't able to ramp the close today.  I'm stunned!!  They gave it whirl between 13:30 and 14:30, as can be seen in the channel below, but the bears came out and gave them a smack down at 110.20, and that was all she wrote. 

Have a good evening all.