SHORT TERM: market gaps up for third tuesday in a row, DOW +60
Overnight the Asian markets were all higher gaining 1.6%. Europe opened higher and gained 1.3%. US index futures were higher overnight as well. A monday speech from FED governor Duke: http://www.federalreserve.gov/newsevents/speech/duke20120116a.htm. At 8:30 the NY FED was reported higher: 13.5 vs 8.2. The market gapped up at the open to SPX 1300, a new uptrend high, and continued higher until hitting the OEW pivot at 1303 in the opening minutes. After that we had a pullback to SPX 1297 by 11:00, then a rally to 1301 by 12:30. Another pullback followed, this time right down to the 1291 pivot. A pivot day! Then the market bounced to close at SPX 1294.
For the day the SPX/DOW were +0.40%, and the NDX/NAZ were +0.75%. Bonds lost 1 tick, Crude gained $2.10, Gold rallied $12, and the USD was lower. Support for the SPX moves up to 1291 and then 1261, with resistance at 1303 and then 1313. Short term momentum hit quite overbought during this AM, then backed off to below neutral in the afternoon. Tomorrow, PPI at 8:30, Industrial production at 9:15, then NAHB housing at 10:00. Also, there is there is Congressional testimony by FED governor Tarullo at 9:30.
Today’s gap up opening extended the rally from SPX 1202 to a potentially complete 13 waves for Minor wave 3. This Minor wave, however, is still a bit shorter, (1202-1303), than Minor wave 1, (1159-1267). Typically third waves are longer than first waves. But the only firm requirement is that they are not the shortest of the three impulse waves. Should this afternoon’s pullback, from SPX 1303, extend into tomorrow and drop below 1283. Then there is a good chance that Minor wave 3 completed at today’s high. If the SPX holds above that level and makes new highs, Minor wave 3 is very likely extending again. Still see lots of resistance between the SPX 1291 pivot and SPX 1327 medium term.
Short term support is at the 1291 pivot, SPX 1278, and the 1261 pivot. Overhead resistance is at the 1303 and 1313 pivots, with SPX 1327. Short term momentum hit quite overbought today then dropped below neutral. Short term OEW charts continue to remain positive with support now around SPX 1284ish. Best to your trading!
MEDIUM TERM: uptrend hits new high at SPX 1303
LONG TERM: bull market
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
Hi Tony, I wonder if those guys who bought cds (over greek bonds) get paid in case lenders agree by themselves reducing 70% of its debt ?
Mario,Maybe RC knows that answer.
The short answer is, that is still up in the air. The specifics of how the actual deal is concluded will make a difference.
That said, I can tell you what the market is pricing in, and that is that the CDS WILL be triggered. 5yr Greek CDS trades at about 65/69 points upfront. Which in essence is saying there is probably a 100% chance of default with a recovery in the 30-35% range. If the market thought there was a high probability of CDS not being triggered, it would trade much more cheaply. If you thought there was only a 50% chance of your CDS being triggered, then that would effectively be incorporated in the priced default probability. If recovery is the same 30-35%, and CDS only has a 50% of triggering despite a 100% chance of a real default, then CDS would trade at 32/35 or so.
Now, you could argue that CDS is indeed pricing in a 50% chance of being worthless. However, to make that argument the recovery would have to be as low as $15 or so. Hope that helps.
Thanks RC, I got the idea… and it looks like the market likes seeing greece default. the big players bought bonds at discount and cds at the same time. Am I correct ?…no risk !!…unless something differents unfolds…
Should Portugal, Spain, Italy and Ireland get the same debt reductions as greece ?
I have a serious question for somebody. Somebody who thinks that stocks are cheap right now.
I keep hearing how cheap stocks are and I can’t quite figure it out. Namely…
1. Stock prices are higher today than they were a year ago
2. Earnings are (so far) lower this quarter than they were a year ago
3. Earnings estimates are coming down now, whereas a year ago they were going up
To me, that sounds like stocks might have been cheap a year ago, but are clearly less cheap now. Yet, the sentiment I hear is that stocks are so obviously much cheaper now than they were back then.
Any help would be greatly appreciated
-rc
Stocks compared to Bonds are cheap.
haha thanks Tony!
Now, hate to be a stickler, but what exactly is that view based on? If you look at some standard measures of return per risk (sharpe ratio type analyses), it might show the opposite.
Not saying I disagree. I guess my counter question would be, when do you know when stocks are rich versus bonds?
My point is without any kind of risk measure applied, seems to me that one can argue that stocks are cheap under nearly all circumstances.
RC, The 10YR is yielding 1.90%The SPX 2.05% and the DOW 2.44%.So relatively speaking stocks are cheap(er).
Dividend yield then, I presume. So if companies find better investments, increase their capex and reduce their dividend, the dividend yield would go down and necessarily the stocks less cheap?
It seems to me the high dividend yield is as much a function of capital allocation decisions than anything. Earnings yields aren’t particularly high right now by historical standards, are they?
Earnings yields are about at the historical average right now.
Gotcha. Interesting times indeed. Thanks Tony.
cheers RC!
Love oneself, or love oneself and all others. It’s a choice. Your future depends on it. Time is short. Make the choice!
Short Term Upward 3 and Upward C targets for S&P 500
http://www.wavegenius.com/2012/01/18/spx-visual-5-day-chart-short-term-upward-c-or-3-targets/
Looking at GLD for gold it took it 2 times to recapture the 200 day ma (even made a lower low) so I would think it might rest near the 50 day ma and then backfill to the $157-$159 area before moving higher. Below $157 it will probably test the lows.
thanks Sectors
Follow up of my Dec trade.
I just closed my long position in IYT. ( Bought Dec 21 at 89.02, sold today at 92.87).
kudos!
That’s fantastic Igor !
Quit ur day job if u havent already !
See ya soon
Thank you.
Ha-a Lee, I have a goal. When my yearly profit from trading overcomes my small business income then I would seriously think about it. Not gonna happen in the next two years
Well done, Igor. Thanks for keeping us updated.
5 waves complete….short ……stop 1303
that was a quick stop out!
ES
stopped out
I know Im famous for taking a break then being back in 5 minutes
but since I let u guys know about my old dog in pics and mentions( u had no choice) I’ll let u know that I’m making the arrangements to put him down and I’m a bit of a mess about it. Got him in June of 1995
CL S1 support at 99.86 It’s already retraced .50% globex low/high @ 101.02 .
Weve retraced the globex high pit low 2 x ‘s @ .50 % and failed so…..
102 HUGE again.
See ya guys soon
Quoting CLH with those #’s BTW GL !
hang in there Lee
Lee, sorry about your dog. I am a big dog lover. I have a wonderful American cocker-spaniel. He gonna be 13 years old in February, getting old too. I understand your feelings. Be strong.
Sorry to hear that, Lee. You must feel terrible. I hope you get a new one soon to cheer you up.
They’re like family. Hang in there amigo.
Mkt definitely acting like a bullish wave today
blast off time
RC, Credit improving too?
Definitely better today, but not quite as enthusiastic. But then again, when is it?? hah
Unfortunately, what bernanke does for stocks sometimes works the opposite for the bond world. At least in credit. All-in yields right now are horrible, which I think is one of the major inhibitors to a strong credit spread rally. We can thank a 10yr treasury at 1.87%. Buyers are just reluctant, because future returns are getting squeezed down to nothing. Of course, that’s Bernanke’s whole plan – force the incremental buyer somewhere else. But for all that $ out there (like myself) who doesn’t have the luxury of just arbitrarily switching asset classes, it’s just long, slow, pain.
I figure this *must* be a bull market. When else can you have stocks higher year over year, during a time when conditions are worse and earnings (so far) are down 13%? Very interesting.
Agree, and thanks.Yields are so bad here that investors have to seek returns elsewhere.Certainly the game plan in a managed market.
NASDAQ W3 breakout = 3165?
http://www.wavegenius.com/2012/01/18/nasdaq-6-month-visual-chart-w3-breakout-3165/
I can say nothing about gold, but I see a good short-time trading opportunity in gold miners stocks. I posted this setup on GDX on Monday. it’s still in play.
http://buyonstrength.blogspot.com/2012/01/jan-16-gdx-trading-setup.html
Apparently we got the whip part this am…. the last greedy wave after all. Will scale shorts above 1298′s. Based on pattern againt 1303 pivot. Continuing to reach new relative highs daily is not bearish.
I picked a H of a day to get fancy. Price and time are where I want them. I’m in pretty good here.
Close longs @ R….Possible double top.
Thanks Swany
the wednesday roadmap for anyone interested:
http://standardpoor.wordpress.com/
Nifty keeps bouncing back and shows resilience as i mentioned the last time around, whats your take tony now?
Vishal, Can again count a completed pattern into the recent low.Recently removed the downtrend label, getting close to confirming an uptrend.Nifty is quite overbought though.
Usually at these readings it corrects, although if its the start of a trend then maybe we have got 5% more upside i’d say, than x tony
The Nifty looks like a nice 1-2-3 off the low.
Think that was 5 waves up from 97.70 in CL at todays high @102.05
GL !
Any targets to the downside please Lee? I think we head down here.
94.67
thanks Lee. Works for me.
Thanks Alex
I have up side also so I think 102 is HUGE
Hey Alex
Pipeline rumors
IMF said to be boosting their lending resources by $1TLN…….
I looked at the latest SP500 COT report (see link below). It seems that non-reportable are being squeezed and getting more “optimistic”. It might be an early contrarian indicator of a completion of a wave soon. Must admit that the COT is hard to read from a timing perspective but with EWT it can be helpful.
http://screencast.com/t/eR2n5L8N
earnings prior to the open:
Charles Schwab SCHW , Goldman Sachs GS , Northern Trust NTRS, PNC, State Street STT, U.S. Bancorp USB.
http://www.bloomberg.com/news/2012-01-17/s-p-500-rally-may-begin-to-stall-as-bears-disappear-technical-analysis.html
thanks Lee
Great piece. Thanks Lee!
fwiw, Accum/Distrib. diverged from the price today, ( usually an indication of an impending reversal)…. OBV, not so, though .. http://screencast.com/t/t4O3Gj4Ymu4j
Nice- I’ll be shorting today. Let’s see if it helps the rally.
still buyers at 1288 HWB but if that goes I think we could lose some weight.
Gold heading into it’s sell time zone and falling right on time. Oil should fall further and heavily if the S&P can start giving some of it’s gains back!
Any price in general ? Thanks H D
1273. Wed of opex in notorious for whipsaws. Not sure if we saw the whip or the saw yet.
I think initial target to the downside in a wave 4 has to be the 1261 pivot which I guess Tony you would expect to hold before a wave 5 up to complete the rally into late Feb?
Sounds about right, once the SPX drops below 1283
I would love the chance to sell some in the 1304 – 11 window on a high today (er maybe you all would!)
Hi Tony
Quick Confirmation, NFLX has completed its correction and is now in an up move right?
Thanks
Sai
Sai, we do not track that stock
Tony
Short term reversal day with
shooting star at Gann Angle ?
C da blog
possible, several opportunities already, market still drifts higher
DJI Time Ratio 61.8 May 2011 – January 2012…
http://astrofibo.blogspot.com/2012/01/dji-time-ratio-may-2011-january-2012.html
How does everyone read the action in Gold today? Do you think 1609 was the wave 2 low?
It’s not what I was expecting at all; I thought we’d see a much sharper correction, lasting all week, and forming a positive divergence on the weekly chart.
We could have just started wave 2, but honestly it is a little confusing at the moment. Silver today appears to still be in wave 2, and gold probably started wave 2 yesterday.
IMHO the downtrend that started around 1920 is over, so even if we get the small waves a little wrong at this point we will still have some great trading opportunities going forward.
Patrick
Thanks Patrick.
It seems the 1609 figure on 17th Jan was a charting error by stockcharts.com, which they’ve now corrected. So I’m less confused than I was!
Still surprised by this week’s chart though. Expected gold to make a correction at least down to 1590. Perhaps it’ll happen next week?
I’m still afraid of the downside risk: worst case would be a retrace to 1,000. Hoping OEW will confirm the uptrend soon!