Shanghai Composite is tumbling, S&P500 and GOLD are losing Momentum.

 As the whole world is now aware the Federal Reserve has announced 2 weeks ago that it will continue with its stimulative policy effectively starting what is known as QE3. This gave risk taking a boost but we saw last week the waning of the momentum in the S&P500.

   

 This is a great chart depicting the impact of the stimulative policy of the FED since the Lehman Brothers collapse. It is always hard and a bit stupid to call a top before a significant move in the market actually signals it but it is noteworthy to pay attention to the waning momentum indicated by the Slow Stochastics which already turned down. The Candlestick pattern on the Weeklies also gives a warning signal of a possible reversal.

 

 Shanghai Composite has been in the news recently as Industrial Production figures decline further. It is reported that there is a general lack of interest in the Mainland to investing in the stock market and people are rather putting money in the Real Estate as a more prudent way to manage their wealth. The SSEC Index is in steady decline ever since the global financial crisis started and this is in a stark contrast to the steady rise in the US stock markets. And this event has a rather clear explanation.

 The price of GOLD has been a proxy for the flight to safety and the fear of the inflationary policy of the Federal Reserve. It's move is a good indicator of how the investment community perceives the risk of the debasement of the US Dollar and we can easily see how in the last 3 months the QE3 phase has been largely anticipated giving GOLD a boost up to the significant ~$1780 level. Looking at momentum, however we had to exercise caution as it has begun to lose steam already and while we can't call a top without any significant chart confirmation, the risk of retracement at this stage is rather big.

 As Chinese has the saying "A picture is worth a 1000 words" here is the story of the world since the beginning of the global financial crisis. The US found its way to inflate its equity markets out of the mess while the Chinese markets failed to do so which is mainly to the difference in the monetary of the 2 economies. While it is a rather complicated concept to differentiate the 2 approaches it is obvious that the US markets have been a rather better performer.

This chart is simply a confirmation how the depreciation of the US Dollar helped boost the US Equity markets - an easy and proven approach since the birth of central banks around the middle of 18-th century.

US Dollar Index basing above 82 for a potential burst UP.

Classic Technical Analysis would spot the previous TOP at 82 now acting as a Support level as the USDX is basing around these current levels.

Slow Stochastics are turning UP from Oversold conditions and this coincides with the Over-extended run in the AUDUSD and the Stoxx (S&P 500 e.g.).

Trendline Support coincides at the current levels as well and the confluence of technical signals gives me a hint of a good probability we witness an Upward continuation of the Trend move in the USDX and possibly profit from a Long USD position. Good luck and Good trading!

Starting to build Long Crude Oil position after 30% fall.

Crude Oil fell 30% in the last 2 months and it gives me a reasonable Risk/Return perspective to start a tentative Long position around the $80 level via the CL August '12 contract.

A clear stop would be situated below 77.5.

FX Majors are flirting with their 50% retracement levels.

 FOMC tonight announced that it will continue its Operation Twist.

Details can be found in all major news-wires, Bloomberg for example:

http://www.bloomberg.com/news/2012-06-20/the-fed-is-running-out-of-room-to-twist.html

All currencies have had a good run down as the USD strengthened all throughout May 2012. Once a strong trend like this is reversed traders start to think where its correction will end as it is a natural inclination of the markets as representation of the mass human psyche to pursue a goal or follow an established trend while it lasts. And momentum and inertia are most powerful and enduring forces, so I'd like to be short ahead of the 50% retracements of the latest trends as markets tend to mean reverting so a 50% correction should be quite sufficient before markets resume its due course. Otherwise it's all a matter of Risk/Money Management.

 EUR/USD did touch close to the 50% around 1.2787 and is hovering post NY session around 1.27. Slow Stochastics are not overextended and it's way below its 200-Day SMA which naturally reflects its beaten up status among the Debt crisis mess with all the Southern European countries with rising Bond Yields.

 

 GBP/USD has bounced off its Triple Bottom around 1.5262 and quite sufficiently touched the 50% level at 1.5783 and quickly fell back below the 200-Day SMA. Key Levels are the 20011-2012 range 38.2% level at 1.5832 and the 1.5660 (38.2% level of the latest correction) on the downside once (IF) the reversal to the prevailing down-trend starts.

 AUD/USD already did 6 big Figures up and stopped right before its 50% correction around 1.0218 and the 200-Day SMA and also just below the 50% level of the whole 2011-2012 range. Slow Stochastics here are mostly over-extended and poised to flash a major Sell signal.

USD/CAD has built a major short positioning among the retail accounts and that is just one facet of the Long view here. Slow Stochastics are turning Up while the pair is still far from the 50% and the 200-Day SMA, however it's sitting right on the 38.2% of the 2011-2012 range. The signal here is somewhat weaker but those uncertain trades often turn the best winners.

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These levels are on the table now so I'm positioned to buy the USD agains the majors for a resumption of the latest trend we witnessed in May. Certainly we might hit the 61.8% or even reverse the whole trend and venture into major USD weakness but it's all possible in the markets and in the world as a whole so that's why Money/Risk Management is key to our survival as traders and humans as well. Good luck & good trading!

Shorting Long Term Bonds - Sold TLT at 129.59 on June 05, 2012.

Long term Yields are reaching all time lows. I'd like to buy them for a change.

Sold the Long Bonds through the TLT (iShares Barclays 20+ Years Treasury Bond ETF) yesterday at 129.59.

BAC - The next great Short

Bank of America Corporation / BAC - 1st in Volume traded and 45 in Market Cap.
Seems everybody wanna see $10. I myself see overextended move on falling Volume. What more could I ask besides 1.42% Short float?

Looks like a great Short to do.

AAPL begs to go SHORT

The favorite stock of the investing world and the favorite company of all the 'other' world is now paying dividend. It's on a massive extended trend and above 600 now. It's like everything is just fine and it will go to the Moon. I like that. I like that everybody likes AAPL and wants or already has it. This is why I wanna go Short around here.

ADX based on Wilder's notes is a good reversal sign when over 60. and all other techs are way over-extended as everybody could clearly see.

S&P 500 (SPX) - Calling it a Top

S&P 500 Index and global stocks as a whole have been enjoying quite a fancy rally for the last 6 months since the Lows of October 2011.

I could skip the fact that the rally since Dec 2011 is unfolding in a perfect 5 waves pattern. I'm much more interested in my favorite Bollinger Bands that are quite overstretched just like any other technical indicator, pointing to the unsustainable state of the trend at these heights.

Seems to me we are back into the good old days (2004-2007) when we had the Carry trading in FX and all the stocks markets were fostered by the steady selling of YEN for all other higher yielding currencies.

I might just call it a hunch but I'm rather sure we witness a good correction at these lofty levels.

YEN Crosses - Time to Rest & Reverse?

AUDJPY Weekly.
Looks like H&S, doesn't it?

AUDJPY Daily.
Looking for 105 and below if the Resistance at 110 holds, however it seems like forming a lower Top.

EURJPY Weekly.
Trend is still down. Ichimoku cloud is still making it hard for the Longs.

EURJPY Daily.
Same here. Betting on Lower Top formation + overextended momentum technicals.

GBPJPY Weekly.
Rather non-spectacular performance these last 2 years for "The Beast". Still under pressure.

GBPJPY Daily.
Overextended techs and weak below the past Resistance levels around 130. Looking for a revisit of 126 at least.

S&P 500 (SPX) Index - Consolidation Range at the Top

SPX is trading inside the 1340 - 1360  consolidation Range after the reversal off the recent Top around 1377.

The SHORT Perspective::
The Upside is Capped by the 20-Day MA. I have 1325 and 1280 as immediate Targets of the current correction. All Technical Indicators are in Reversal mode and below 1340-1325 I'd expect an acceleration of the current corrective move.

The LONG Perspective::
The 20-Day MA at 1359 is the threshold - a Close above would signal price will need to touch the Upper BB at 1377. Still I'd view the current phase of the market as Horizontal consolidation and I'd expect the Bollinger Bands to show further contraction as the Distribution phase unwinds.

Sold AAPL Short @ 542.92 / NASDAQ is on the verge of a breakdown.

Markets seemed to me rather overextended for quite some time. I was looking to a clear sign of a breakdown.

 

 AAPL Weekly chart suggests we see trend deceleration but the larger time frame does not give a clear signal.

AAPL Daily chart has a confluence of technical signs of a pending collapse so I sold it 2 hours after the Open at 542.92. Price has stalled and is currently trading inside the Bollinger Bands. Slow Stochastics are giving a warnign sign of weakness and my favorite ADX is giving a reversal sign with the Trending strength at 68.69 it looks like it has a limited potential to go much higher from current levels for the time being.

NASDAQ Composite Daily chart. While it might be nice for AAPL to be supported by the love of the whole world the NASDAQ is giving a clear sign of weakness and reversal is a matter of a few sessions. All techs are already in reversal mode and while typing this we are already -1.34% on the NASDAQ and -2.08% on AAPL.

AAPL - my favorite SHORT candidate + Markets at critical juncture

Calling tops is an ego play anyway I had this feeling we are at a critical juncture here and wanted to post a reminder and make a check on the broader picture and especially this, favorite to the whole world, super cool stock AAPL.

Everybody loves Apple and everybody wants or already has iPhone / iPad / iPod / Apple TV and whatever this company produces. Checked the current P/E is 15 on BBG and it looks cheap. Anyway I like that everybody thinks it is a great company.


Short float is only 1.14% which is great - don't like much company in the boat for now.. All analysts rate it Buy/Out/Overperform. So the whole world likes it and most probably has it.

So what happens when everybody has it? There is nobody to buy and the price drops 15% in a day. 

I don't care when. I assume it might have a spike to 580/600 area which will develop into a Blow-off top and then there will be fun times for the shorts which I will be in.

AAPL - Weekly chart has that super Bullish 8 last candles closing outside the Bollinger Bands and Volume supports the Trend. So I will wait for a close inside the BBands and a Blow-off top / Island reversal as a sign.

AAPL >  Daily chart  has all the Technical Indicators I use in an overextended mode. They only lack a Reversal sequence of a 3-5 days to turn down and signal the Top.

Russell 2000 Small Caps have been the out-performers in the last 2 years so once I see weakening here I assume we have to fold, go Short and Hold. Weekly chart has the price action already inside the BBands, and the rally stalling in front of the May & August 2011 Highs.

Russell 2000 Daily chartshows clearly the encapsulation of the price inside a tight range which I assume as Distribution phase of the current 3 month rally. BBands has narrowed a lot which means congestion.

I believe when markets reach an important levels like 13 000 Dow they would like to pause and go back for a happy retreat. It's that simple.

Global Macro: Stocks are poised to collapse on the back of rising Crude and Debt. USD a necessary evil.

ZeroHedge published an interesting piece on the US Debt to GDP ratio passing the 101% mark:

http://www.zerohedge.com/news/us-debt-gdp-passes-101-global-debt-ponzi-enters-its-final-stages

So it is imperative to see the implications on the USD Index as a representation of the credit in the world reserve currency.

Obviously on the grand scheme the US Dollar Index is right in the middle of nowhere - it's in the average of the 6 year range after staging an impressive rally in the second half of the 2011. Now we are puzzled which one is worse the printing press of the FED or the sanity of the EU monetary union. And as the chart says we are equally poised to avert both of them so we are left right in the middle.

ZH shows that the FED debt monetisation is supported by the FED itself along with the next 2 most indebted global powers - UK & Japan. So what choise you are left if you want to diversify away from the Dollar?

GBP? Look at the economy and the scale of Debt-to-GDP ratio?

JPY? At the time it makes all time highs and the BOJ & MOF are desparate to weaken it through never ending interventions?

EUR? With the Greeks and the Italians and the Irish and the Spaniards?

How about Chinese RMB or Russian roubles?

Or simply buy Gold at the historic Highs and pray it is a true safe haven in the time of pending inflation. The Debt monetisation of the FED has been fueling the Stock rally in the last 3 months and the S&P 500 is making new High close to the H1 2011 High.

Problem is what stocks will do when commodities breakout on the upper end. Case in point Crude oil breaking above $105 and making things worse for the producers and transportation.

This simple fact finds an evidence in the classical technical analysis convergence between the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average which by the classic Dow Thoery are necessary to confirm each other and this obvious divergence calls for a breakdown.