Trump Rally Over. Bear Market Ahead.

What is the square root of the March 9, 2009 low of 666.79?

25.82

Today the SP500 moved 5 points higher than its previous high, hit the 2582 level then backed off.


As i wrote 3 years ago on the subject of Pi and it's relationship with numbers.


Anyway the market cycle is about to change. Raise Cash and wait to get back into the market.

Now the End is Near and so I Face the Final Curtain

Wonderful Wednesday.

We expected this rally (as per our March 10th post) and now all US markets are well on their way to breach the all time highs with the small caps leading the way. If you want to buy now, its too late, as i warned previously. You had your chance at the 2040s level, we're so far away from an appropriate risk reward scenario its best to stay on the sidelines and play the short side when we get it. The target for this move is in the 2130s… then what? Then comes the 10% correct with the brunt happening in the first week of May… Until then expect that tax season ira money to chase this rally.

What's alarming is that NO ONE is talking about where the Greek 3yr bond is trading at. Right around 20%. Greece can't pay and the market knows it. They can't even come up with the cash to pay roughly 1.6B in retirement benefits owed to its citizens. This is the 3rd time Greece needed a bailout. These banksters  didn't outline a way for Greek citizens to work their way out of a recession, instead these GERMAN banksters are destroying the peripheral European economies for the sake of creating a Union which only Germany benefits from (forex competitive advantage). ENOUGH IS ENOUGH!

Greece’s economy has shrunk by a quarter under the conditions laid down by Germany and other euro-area nations in bailout terms. The jobless rate increased in the fourth quarter as the economy began shrinking again and a political standoff rekindled concern the country could leave the euro area. The percentage of adults living in households where no one works rose to 19.6 percent in 2013 to 1.1 million, from 7.5 percent in 2008.

Lets not be out of touch with what's happening. Ask yourself would it be okay if New Yorkers would be charged 20% on their debt, while Florida actually got paid to borrow? And this in the same Union which we are suppose to be living "together". No freaking way! 

Yes. The Euro will eventually look different in 5 yrs. 

Beside the Euro news are debt limit shenanigans will come front and center again. Expect the selloff. 

Also, lets look at the health of the underlying securities of the Dow Jones for instance. 30% are near 52 week lows. Not Healthy at all.  The laggards include the commodity-related names Exxon Mobil (XOM), Caterpillar (CAT) and Chevron (CVX), as well as broader market stocks such as American Express (AXP), IBM ( IBM), General Electric (GE), McDonald's (MCD), Verizon(VZ) and AT&T (NYSE: T).

Dollar is the driving force behind OIL's Move, Don't assume otherwise

The rate of change in the Dollar has not been seen appreciating at this pace in quite some time (back in '08 was the last time and never before that). This is happening mainly because every other central bank is easing, meanwhile we "look" to be embarking on tightening.

2 reasons the Fed doesn't need to tighten and probably won't raise rates until 2016:
       1. By ending QE and not purchasing mortgage backed securities, that is in essence tightening.
       2. The dollar's appreciation guarantees low inflation for the next year

The Dollar Index hit 100 this past week. Huge.
Looking at it versus the Euro, the 1.08 was a level i thought we had support, but with many humans trading and behavior becoming extremely bearish, i believe we overshot temporarily and will revisit 1.08 and eventually 1.10 before the end of the month.

That will give a a reprieve to oil's slide lower and will allow it to rally to $65-70 into June before rolling over again. Oil and the Dollar move tit for tat.

As i mentioned in the previous post.. now until June will be an extremely volatile time trading, so stand aside.

My take away is if OIL can't close below $44 for 3 days, its done going lower. However if it stays below $44 for 3 days we will quickly drop to low 30s.

I believe OIL takes off higher in a big way once FOMC meeting passes on Wednesday (in 3 days).

That means i'm bearish for the short term on the dollar (mean reversion) and bullish on Oil. We'll see

STOP with the Oil Glut rants already.. and we have plenty of Storage Capacity Left

All of sudden everyone is a Bear on Oil. In fact now you have many of those who never thought we would get down into the $40s, declaring we're filled to the gills and prices will soon collapse. That may be the case, but not because of inventory reasons. It would happen if the Dollar continues to rip higher (which i will address in a new post shortly after).

The US is not running out of Storage capacity, contrary to what you read by the EIA.

"Oil began the day lower after the IEA, which advises industrialized countries on energy, warned the global glut was building and the United States may soon run out of tanks to store crude. U.S. supply so far shows precious little sign of slowing down,  the IEA said. Quite to the contrary, it continues to defy expectations." -http://finance.yahoo.com/news/brent-holds-above-57-bargain-034958839.html?l=1

Are we going to let these statements actually dictate how we are going to trade with out digging deeper into actual analysis, instead of solely relying on these talking heads word. Since October, national inventory of crude oil has been increasing 1 million barrels every week. Yes at first blush, that seems like we have an OIL GLUT, but those numbers are not telling you about those that are storing Crude oil in anticipation of higher prices later this year. The market is Contango, so it makes sense for participants to store oil now and sell in 6months time locking in at a price that is ~$6 higher. 

Just because someone says we have the highest inventories of Crude in decades, doesn't mean its bearish news. We need to get to the facts, which most pundits miss. How much storage capacity is there at Cushing? The Answer is 71million barrels with more storage under construction. So that means if we continue building inventories at the same pace as the previous 6 months, it would take 4 months to be at Capacity. But there are events that won't make that happen because we are entering the driving season and refineries are coming back online, so Oil that is being stored, won't go into storage next month but go to a refinery. The difference of how many barrels a refinery uses in the summer vs. the previous 3 months is 1million barrels. So that means don't expect more builds to happen as the summer driving season begins. 

2 more factors are that production will slowly come back down as rigs are being taken offline and secondly check out how many SUVs have been sold in recent months which will lead to some marginal increase in consumption. 

Finally check out what the EIA published a few weeks back:

We are only at 60% capacity. Relax we have PLENTY of storage room and there's no need to panic about where to put the oil.

What is the driving force for the price action in Oil ? THE DOLLAR!

I will address this in the next post.

The Comeback: SPX 2140 & NASDAQ 5000

Amid a Global Sell off, traders are looking for reasons why. What ever the reason, it will long be forgotten and those that sold wished they'd have bought. Especially going into a Fed Meeting where they are highly likely not to acknowledge a rate increase and leave it more status quo.



Even the VIX is overdone on the Upside

Also one final technical indicator the NYSE Mclennan Oscillator is way oversold.

This all sets up for a low risk buy trade.

THE GOLDEN RATIO & π: The Phi and Pi relationships, a mathematical importance to Markets

Phi, Pi OH MY!

• Phi, the Golden Ratio that appears throughout nature.
• Pi, the circumference of a circle in relation to its diameter.

Look to the pyramids. Look to Nature.

This site goes into great detail about life's most intriguing set up: http://jwilson.coe.uga.edu/emat6680/parveen/fib_nature.htm

If we apply two of Nature's special laws, the Golden ratio and Pi, to the markets we find a confluence of price levels almost at nearly the same price!!

Let's break it down.

Phi's number is 1.618  

The Fibonacci extension from the 2009 low, gives us a price target of 2138

Pi's number is 3.14159...

Multiply Pi by the closing low in the S&P500 (676.53 x 3.14159) = this will yield a price target of 2125.38

The Market will make a ROUND TRIP MOVE or the GOLDEN MOVE  as it approaches these targets. 

Once the move is done, it will be time to get off the bus. And we'll witness the bull market high for some time.

Ultimately my price target for the S&P500 is 2150 based on Pivot Point Analysis (using the /ES Sept contracts)

Remember these are important ratios that are around us and with us everyday of our lives.

Respect them.

 

CYCLES CYCLES CYCLES

The idea of cycles of prosperity and cycles of suffering is nothing new. The bible tells of the story of Pharaoh's dream, which Joseph interpreted as 7 yrs of feast and 7 years of famine. Even back then they acknowledged a pattern or cycle to matters. It is also evident that nature moves in cycles. The earth spins around once a day, while circling the sun once a year. Because of this we have seasons, which determines when Plants and Animals are born, grow and die. Other cycles govern when markets, societies and civilizations peak and decline i.e (K wave).


I also want to add that Circles are a form of cycles. When you run around the track, you make a full circle or when the hamster goes around his wheel, once around is called a full revolution. Its a cycle, there's a starting point and ending point.

With regards to Circles, you have one of nature's most amazing ratios besides Fibonacci, Pi explains the  relation of a Circle's circumference to it's diameter. It's a mathematical constant. Circles are everywhere=Pi is everywhere. The disk of the Sun. The spiral of DNA Double Helix. Pupil of the eye. Also in Physics, Pi describes waves of light/sound.