Commentaries on the market
Comments as of close Fri, 3/26/10
In Thursday letter mentioned that have a personal rule that says if take a bad hit on one or two markets I then will always look for other positions where might have good profits and if those markets are short term overextended I will take profits on those positions even if line rules say to hold longer. Idea is that from a psychological view if don’t do this, take some good profits to offset some surprising losses, and then next day the profits start to disappear it can be very discouraging. Followed this rule on Thursday night by taking good profits on shorts in Euro and Silver and this made big difference since if had held these positions profits would have diminished considerably on Friday. Psychology is very important in this game and sometimes have to violate normal “line” rules and follow some “psychological” rules like this one.
If you follow news are probably aware of unusual treatment of Israeli Prime Minister by US President, i.e., surprisingly negative. Supposed reason for this was disagreement over building new settlements in Jerusalem area. Heard an observation this weekend that made some sense. Suggestion was that this disagreement not big enough to generate that type of treatment to one of best US allies and that treatment may have been due to serious disagreement on what to do about Iran’s nuclear program. What if US trying to dissuade Israel from bombing Iran nuclear facilities and Israel not listening. Obviously we will not know Israel has bombed Iran until after it happens. Should this happen it could, almost certainly would, produce a huge up spike in Oil and down move in stocks. This one reason why I have zero interest in being short Crude and to lesser extent being long stocks at this time. Just something to consider.
June S & P - Status - Neutral (to Bullish)/crosscurrent. Observations - Market now in fairly solid crosscurrent mode and rule for this is to expect more choppy, sideways type action than recent up trending action. Next day down signal in VIX on Thursday did not work, although didn’t really fail either. This market a tough market to get much of anything on downside these days. However, pattern is least positive/most negative in couple months and so “should” at least pause here for a while and could surprise on downside. Bottom line - Lines say sidelines and agree.
June Bonds - Status - Bearish/concurrent. Observations - Trend just marginally down so far but in position for this new down trend to strengthen. Momentum line pattern (SL/ML) is fairly negative now and in position to become more so. Feel like huge govt deficits may be starting to have an impact on this market and if so could be just starting big, long term down move. Hard to understand how any rational investor, individual/corporate/nation, can believe that lending money at a 4% annual interest rate to a govt that is running 1.5 trillion deficits for as far ahead as can see is a sound idea. Recent weakness supposedly due to lagging interest in recent govt debt auction, believe this will become standard and is so could be headed for big down in this market. Bottom line - Can be short, can go short on any additional up Monday or Tuesday. Stops tough to place since want to sell rallies, not buy, but should be able to use somewhere in 116.16 - 117.00 area on late in day/close basis for time being (maybe a little lower if short the June Notes).
June Euro - Status - Bearish/concurrent. Observations - Pattern solidly negative and so odds continue to favor more to downside. Had good up day on Friday and so any further up tonight or tomorrow would qualify as good enough to initiate new shorts. Rule is when pattern solidly bearish/concurrent than can short any one to two day rallies. This market still being affected by news of Greece debt and what EU will do about it, but this becoming less of an impact as time goes on. When price and SL hit extreme lows like did on Thursday close and get just a small down day it’s not surprising to see some upside and so far this is what have seen, but pattern so negative rally “should” not last too much longer, even though up quite a bit in terms of price. Bottom line- Can be/go short with stops probably needing to be at least above 134.50 on late in day/close basis and maybe 135.00 level better. (Swiss also Bearish/concurrent but Euro much more negative and so better bet for any shorts. Pound pattern close to becoming concurrent to downside and so pattern there getting more negative, i.e., can be/go short there as well with stops probably OK in 150.00 area on midday/to close basis).
June Yen - Status - Bearish/concurrent. Observations - Pattern here very similar to that of Bonds/Notes and so can be/go short this one as well. A little short term oversold, but as rule when in solid bearish/concurrent mode and get one to two day rally can justify being/going short. Only problem with shorts here is have to use fairly generous stops for while longer since with this type of pattern want to short rallies, not buy on stop. So if short would give them good chance and if not short would sell on any further rally (any price above 108.50 would qualify as decent entry price for new shorts). Bottom line - Lines say can be/go short and agree. Stops need to be fairly generous with at least 109.50 on late in day/close basis probably OK for Monday.
June Aus and Ca$ - Status - Neutral/crosscurrent. Observations - Up trends still quite solid here, but rest of picture too mixed/negative to justify longs at moment. ML now on strong down cycle so market now in solid crosscurrent mode and rule is to expect more choppy, sideways type action when this case. Recent dip now becoming a little too pronounced to expect any good sized, sustained up move for time being. Bottom line - LInes say sidelines and agree.
June Gold/May Silver - Status - Bearish/Neutral/weak crosscurrent. Observations - These markets have been set up fairly negatively for past week yet price has not gone down much and this an upside warning sign. However, other than being a little short term oversold really nothing much in way of positives and so cannot make any case for longs yet. Did have fairly clear negative strength on Friday since Gold up decently and more than Silver and Platinum down. Will have to see if this translates into decent weakness by Monday’s close, it should. Suggested stop levels hit tonight (Sunday) in Gold and close to doing so in Silver, but if short either would give them at least little more chance due to negative relative strength and overall somewhat negative patterns. Finally got some positive signs from COT data in Gold with commercials adding decent number of new longs and taking off some shorts, but need a lot more of this to change overall negative data there. Bottom line - LInes say can be lightly short and while this looking less attractive at moment if short would give them little more chance (but longer price of June Gold above 1105.00 and May Silver above 17.00 tonight/tomorrow the better the case to cover and go to sidelines).
May Crude - Status - Neutral/crosscurrent. Observations - For third Friday in row had down day in this market and this unusual. Past two weak Friday’s led to at least temporary sharp down on Monday. Picture here still too mixed to make good enough case for position in either direction. At moment trend too positive for shorts but rest of picture at moment too negative for longs. Bottom line - LInes say sidelines and agree.
May Corn and Wheat - Status - Bearish/mildly concurrent. Observations - Lines justify shorts but with both prices and SL’s on recent lows being short here looks very unappealing to me. Missed this down (was long) and so prefer sidelines at moment, but still see much more potential on upside and still have type of patterns that could turn quite positive without too much up, just need to get some up before can try long side again. COT data remains very bullish on all in this group and this eventually always leads to good up moves, but rule is should wait for trend to change and so far this not there. Bottom line - Lines say can be short, prefer sidelines.
May Beans - Status - Neutral/crosscurrent. Observations - Decent up day on Friday and so far showing some additional strength tonight. On line basis trend a little too negative to make any legitimate case for longs, but rest of picture too positive for me to consider shorts. This one clearly the most positive/least negative of group and if/when trends turn up beans should lead on upside. If can turn SL up in next two, three days and do so from a higher low would be able to make decent case for longs again (and if want to be aggressive still see some anticipation longs as OK). COT still very bullish here as well. Bottom line - LInes say sidelines and have to agree, but want to be long this market and see nothing too wrong with being long now.
May Cotton - Status - Neutral/crosscurrent. Observations - Up trend too strong for shorts, but momentum line pattern a little too negative at moment to be/go long. Want to be long this market but both SL and ML coming down a little too fast at moment so believe it’s best to wait while longer. Price getting down to attractive levels for buying though so getting more tempting to start trying to pick good price to get long, but will wait at least another day or so. Bottom line - Lines say sidelines and continue to agree.
Chick Goslin
