Monday 26 May 2014

Memorial day - bits and pieces

US indexes continue to broadly climb, with the Dow/SP/Trans set to break new historic highs in the immediate term. The issue remains... when will the giant wave from Oct'2011 conclude? Many are agreed it will be this year, but this summer, or not until the autumn?

Since the casino is closed today, I wanted to take a little time to look at a few random bits and pieces...

Trans, monthly2, rainbow

Unquestionably, the most bullish chart out there. We've now a green candle, the first since last December, there looks to be upside to the 8150/250 zone. If the market gets upset later this year, downside target zone is 6000/5500.

R2K, monthly3, rainbow

I am still guessing the R2K - if not also the Nasdaq, have already put in their highs for this year. I consider the weakness since March, the first warning of trouble for the broader market.

If 1212 was indeed a key high, the only issue is whether the next multi-month decline gets stuck in the low 1000s...or low 900s. The latter would most certainly equate to sp'1625/1575.

QE - taper'5 due at the FOMC of June'18

The Fed look set to cut monthly QE to $35bn a month, at the start of July.  At the current rate, QE will be cut to zero, at the FOMC of Dec'17.

Of course, my key concern - from an equity bear perspective, what will the Fed do if equities drop 15/20% this summer/autumn? Would QE taper be halted...or even reversed back to $50-75bn?

USD, monthly, 15yr

Contrary to what the 'dollar doomers' would like to believe, the USD is looking stable. Indeed, from a MACD (blue bar histogram) perspective, the cycle look primed to pushing back upward. At the current rate, the cycle will turn positive in July/August.

Unquestionably, a higher USD will put increased downward pressure on ALL US asset classes, not least the precious metals. Of course, such downward pressure doesn't mean there will be net declines in prices, but this aspect of price pressure is very important to keep in mind.

VIX, monthly'3, outlook

So..we have a VIX in the 11s, and the 10s, perhaps even the 9s look set to be hit in the near term. Certainly, if sp'1940/60 zone in June/July, then I'd not be surprised to see single digit VIX, which is something we've not seen since Feb'2007 - when the property bubble peaked.

As for the months ahead, I'll be looking for a VIX spike into the 30s...the 40s look difficult, even if sp' drops (briefly) into the upper 1500s.

I do not see VIX 50+ until late 2015/early 2016 at the earliest. So..from a trading perspective, I'd not be buying any call blocks above strike 25/30. As things are, I've no intention of picking up any VIX until at least mid June.

Video update from Hunter, with doomer...Rickards

I will note, I kinda find it lame how some are solely focused on Gold. I mean, sure, I can see its use as insurance against currency implosion, and central bank money printing. Yet, what about other assets? Sinclair, Rickards, and many others are one tune asset pumpers, and there are times when I grow real tired of hearing them.

Indeed, Armstrong just posted this

As for tomorrow, and the week ahead...see my weekend post!

Back at the Tuesday open :)

Bonus video...

Highly recommended, with a very balanced overview. Certainly..all of the recent price chop in the sp'1800s, could merely be the lead in to an attempt to hit sp'2000, given another few months.