Structural Logic

Gold Drops Most In 30 Years

Previously, levered hedge funds were forced to sell gold on stock margin calls. How long until today's gold plunge, the largest 2-day drop in the past 30 years, forces funds to start selling stocks to meet margin clerks vocal demands some time around 2pm today?

Guest Post: Return Moves to the Quarterly Average in the Bear Market of 2007-2009: Gann Time and Price and Cycle Analysis Overlay

The 21 day plunge into the May 25 low caused significant technical damage to the SP500. Specifically, it caused the quarterly moving average to roll over and slope down. The bearish slope indicates a potential shift in trend from bull to bear.

During the bear mkt of 2007-2009, dead cat bear mkt bounces typically lasted 18 to 34 days. That includes the 22 day rally into Dec 26 2007, the 18 day rally into Aug 11 2009, and the 32 day rally into Jan 6.

Now, in stock mkt bull cycles, bullish impulses “right translate” and left translate in bear markets. Let me explain. Cycles are measured from low to low. The last low to low cycle was 77 days ~ from Feb 5 to May 25. The final low to low into the March 6 2009 capitulation was 75 days. Using the last 77 day low to low cycle as our starting point, for this dead cat bounce to right translate, it would have to rally 39 days or more off the May 25 low. Now, as we noted in the typical dead cat bounces in the last bear mkt expire 18 to 34 days later.

Guest Post: Mirabile Dictu! The First Market Rally Of 2010 That Merits More Than A Few Words

“U.S. Stocks Jump in Final Hour, Pushing Up Metal Prices; Dollar Pares Gain U.S. stocks rose in the final hour of trading on speculation the European Union may propose a solution for Greece’s budget deficit, reports Bloomberg.

This end of day soundbite provided the fodder/excuse for a short-covering rally on the Feb 5 NFP report. Traders and investors should recall that the 2009 low was set on the March 6 NFP report, that the 2010 high came on the day following the Jan 8 2010 NFP report and that the crest of June 5 2009 leading to the June swoon of 2009 came on a NFP report. Obviously, the spark for the short covering today had nothing to do whatsoever with the NFP report, but alas, how often do market buying and selling climaxes occur on NFP dates give or take a day? Plenty, and too many for me to recount to you off the top of my head, but longtime clients know to look for and expect equity buying and selling climaxes on key announcement dates such as NFP reports. End of story, period!

Guest Post: December Durable Goods Missed By A Mile, Market Angst Reasserts Itself

Long-time readers know that I am keenly sensitive to lows set in the equity markets on
consumer confidence reports. In short, if the SP500 is above a significant Consumer Confidence report low
(some Consumer Confidence (CC) lows are more important than others, and this week’s CC low was quite
important as it came just prior to the confluence of several significant events following it), investor
confidence is greater than consumer confidence. If the SP500 is below a consumer confidence low, then
investor confidence is worse than consumer confidence. That in a nutshell explains why it is imperative
stock market traders pay close attention to the Jan 26 CC low was set at 1081-1086. Most important is 1086
pit session low (not the 1081 electronic low) which dovetails much better with the December low anchored
at 1085. - John Bougearel

Guest Post: Y2K Pent-Up Selling Demand Model For E-minis At Onset Of 2010

The stock market rescue operations of 2009 have created pent-up selling demand. We should all anticipate profit-taking on the first two or three trading days of 2010. Previous examples of pent-up selling demand that led to sharp stock market declines in the first two or three trading days of the New Year were 2005 and Y2K. This report examines the Y2K pent-up selling demand model.

Guest Post: Gold Enjoys A 10% Bath Following Strong US Data And Weakness In Euro-Region

The near term concern for gold is that they may be under pressure until they can get past the Jan 8 US jobs report, because it is that jobs report that sent a signal to market participants that a so-called US jobs market is healthy for the US dollar. The strong US jobs report scattered and plundered gold mkt speculators who were taken to the woodshed that day. That Dec 4 jobs report is why gold bulls may have to exhibit patience until nearly the next jobs report.

Guest Post: Why The Big Drop In Gold?

Gold prices plunged $80 or 6.5% in less than two trading sessions on the strong and unexpected indication
that the US job market was stabilizing. What was that about? So that prompted an inquiry from a client who
asked me on Friday, why the big drop in gold prices? Why indeed. Here I am reminded of two snail jokes.

Guest Post: Dollar Closes About 50 Day Average On Dubai, Japan Emergency Meeting, And A Strong NFP Report

On Wednesday Nov 25 2008, the dollar kissed its 2 year Nov 21 2007 two year anniversary low at 7450. 7450 was the 2007 year low, btw. I quickly scanned the headlines that day and sent a email memo detailing the uber-bearish headlines on the US dollar. The dollar was posting 14 yr lows in the yen. Russia was diversifying into Canadian Loonie, the Suissie rallied on news their CB would remove stimulus, the pound rallied on news the UK GDP was stronger than expected, the Aussie rallied too on news of a their reserve banks 3rd rate hike.

Guest Post: The 30 Year Looks To Be Screwed Into Year End

On October 24, this newsletter mapped out a case for a bearish resolution in the 30 year treasury that could flush the 30 year to the 105-107 handles by year end. I am not saying there will be such a flush into year end. However, it would be a disservice not to point out the possibility and to prepare for such a scenario. And if there is going to be a downside resolution and increase in volatility, the first week of November maybe starting it Here is why.

Guest Post: Alcoa And JPM Set The Q3 Lows, Are They Going To Set The Highs In Q4

Digressing again: we roughly know who are going to be the winners and losers in our socialist system. This is wholly unsatisfying. Instead of the financial system firing on all 5 (JPM, GS, C, BAC, and WFC) cylinders, two of them are backfiring. That is a bunch of crap that our policymakers built into the system when they decided to throw a TARP over the mess and pretend that the crap was all gone, that they could make the problems go away by hiding the toxic securities over on the Fed’s balance sheets, and stuffing hundreds of billions of taxpayer dollars into the banksters coffers and then let them borrow money for free at the Fed window so they can make a killing on the yield curve. And that is supposed to be palatable for public consumption. I think not.

Guest Post: E-Mini Chart Update

Yes, this is a tricky stock market trade for both bulls and bears. The trickiness is largely a function of the bull momentum off the lows this year. After a 62% ramp-up from the March lows, you would think the market would like to take a breather, for more than 7 days, particularly when the economic data month over month is not “equity-friendly.” But no, the spate of bad news we have seen over the past two weeks only spikes the market for a few hours or days, and then comes rushing right back up to the highs.

Guest Post: Strength Of Post Oct 2 NFP Bounce In Equities Is Impressive

It matters not whether companies worldwide see profit increases. We know on balance a lot of companies will not do well in this economic climate. The stabilization “meme” is in, and as long as companies on balance can show signs of that, the earnings season will go off without a hitch. Technically speaking, the strength of the short-covering rally is greater than the rally off the Sept 13 and Aug 17 lows at present. So the strength may persist into Wednesday or Thursday. This will leave room for the stock market to clime into the 1050’s where it will meet resistance from the August retail sales high at 1052, the Sept ISM high at 1055, and the Chicago ISM high at 1064. Well, we don’t expect the strength will go so far as to challenge last week’s highs at 1064-1066, there is every reason to suspect the stock market will challenge last week’s upper extremes near term, based on some of the considerations mentioned above. Note, the overnight low at 1035 is being supported by the Aug highs at 1034 and the three M&A’s at 1036.

Guest Post: Is The Third Quarter High In Place?

The problem with being perpetually short is the need to be willing to be perpetually chased out of the
market for an untold number of short-covering rallies. This strategy works well for nimble traders that
have a great feel for market behavior. The reason I start this report off with the saying “if you’re not short
already is that you will indeed risk missing the turn. We got a lot of ground to cover, here, so let’s start
with the big picture on the weekly charts, then move right into the daily and intraday charts.