Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Wednesday, the 12th of October.
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HARRISBURG, PA — SEEKS BANKRUPTCY! Is America Next in Line?
It's not difficult to believe that Harrisburg Pennsylvania is filing for bankruptcy with overwhelming debt of almost half $1 billion. It shows once again that politicians have no clue when it comes to spending money, particularly when it's someone else's money.
The question we must all ask ourselves is what's next? In our home state of Maryland we have $20 billion unfunded liability for entitlements. I'm sure it's the same across the country. We have had reckless politicians spending too much money and not being held responsible for when things go wrong. It was interesting to see what was happening in the Ukraine, where they're jailing their former prime minister, Yulia Tymoshenko, to a seven year jail term for abuse of power during term as prime minister.
Just imagine how that would play out in other countries, including the United States. It certainly would make politicians think before committing and spending money that we don't have. At the moment, no one is held responsible.
It also looks like the politicians in the Euro Zone have kicked the can down the road. This just moves the financial disaster to future generations. No one politician wants to assume responsibility for the incredible amount of future debt they are creating.
What does this all have to do with the markets?
We will rely on our Trade Triangle technology to keep us in the loop and in the markets at the right time.
Now, let's go to the 6 major markets we track every day and see how we can create and maintain your wealth in 2011.
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S&P 500 INDEX
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The S&P 500 index is now clearly in an overbought position and we expect the 1210 to 1220 area will be tough going for this market on the upside. There is heavy resistance at the 1220 level which in the past has turned this market to the downside. We want to see how things develop in the next 24 to 48 hours. Intermediate and Long-term traders should continue to hold short positions in this index.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 55
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Suggested S&P 500 Trading Instruments:
Non Leveraged ETF's: (Long SPY) (Short SH)
2 x Leveraged ETF's: (Long SSO)(Short SDS)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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SILVER (SPOT)
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Spot silver reached its best levels in ten days, but did not change the overall direction for the trend in this market. We expect we will see more range bound trading. Our Chart Analysis Score is - 65 indicating some of the downside pressure has been relieved from the market. As always, we will rely on our Trade Triangle technology to keep us on the right side of the trends. Traders who are following our Trade Triangle Technology should be short this market with appropriate stops.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trend = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 65
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Suggested SILVER Trading Instruments:
Non Leveraged ETF's: (Long SLV) (Short the ETF SLV)
Leveraged ETF's: (Long AGQ) (Short ZSL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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GOLD (SPOT)
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The spot gold market moved to its best levels in 15 days and the only thing holding it back is that our intermediate weekly Trade Triangle remains negative. The Chart Analysis Score for this market is +65, indicating that a trading range remains intact for this metal. We would not be surprised to see this sideways action continue for another week or so. I think most traders would be better off just watching from the sidelines until the volatility subsides. Only long-term traders should maintain long positions with the appropriate money management stops in place.
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = + 65
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Suggested GOLD Trading Instruments:
Non Leveraged ETF's: (Long GLD) (Short the ETF GLD)
Leveraged ETF's:(Long UGL) (Short GLL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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CRUDE OIL (DECEMBER)
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IMPORTANT ALERT: Please note that we are switching to the December contract for crude oil. With both weekly and monthly Trade Triangles in place, we see little enthusiasm to go long this market at the present time. Presently this market is overbought and we expect to see a pullback from current levels. As you know this market has been closely tied in to the movements of the S&P 500. Overall we still view the trend in this market as negative. Intermediate and Long-term traders should continue to be short the crude oil market.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 65
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Suggested Trading Instruments:
Non Leveraged ETF's: (Long USO) (Short the ETF USO)
Leveraged ETF's: (Long UCO) (Short DTO)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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DOLLAR INDEX
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The dollar index has pulled back dramatically from the high around 80.00 and is now at the lower levels of the Donchian trade channel. With that said, we expect this market to begin to regroup and move back to the upside. This index is heavily oversold and with both our weekly and monthly Trade Triangles in place we expect to see a resumption of the uptrend. We continue to be friendly to this index and want to hold positions with money management stops. This index is coming from a large energy field that is capable of carrying it much higher. Intermediate and Long-Term traders should maintain long positions with the appropriate money management stops in place.
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = + 55
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Suggested DOLLAR INDEX Trading Instruments:
Non Leveraged ETF's: (Long UUP) (Short UDN)
Leveraged ETF's: (Long) (Short)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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REUTERS/JEFFERIES CRB COMMODITY INDEX
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With both the weekly and monthly Trade Triangles in a negative mode, we continue to view this index in a negative light. Today's market action so far has reversed from the beginning of resistance starting at the 310 level and extending up to 315. A move and close below the 310 level today would be viewed as negative and we would expect this market to back down and test the 300 level. Intermediate and Long-Term traders should maintain short positions with the appropriate money management stops in place.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 85
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Suggested REUTERS/JEFFERIES CRB COMMODITY INDEX Trading Instruments:
Non Leveraged ETF's: (Long CRBQ) (Short the ETF CRBQ)
Leveraged ETF's: (Long) (Short CMD)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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As always, we rely on our market proven Trade Triangle technology for catching the big moves.
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This is Adam Hewison for MarketClub and I'll see you tonight on the MarketClub TV show and tomorrow with my mid-day update. Don't forget to enter for a free 1 year subscription to MarketClub on a HP WiFi Tablet.
All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub
YES
Unfortunately, you're right... there is very little accountability.
@ Mike & Deb - You are right... most indicators are lagging. I only know of two that are not lagging... I wrote about it here: http://www.investinthemarkets.com/education/day-trading-using-leading-technical-indicators/#more-1512
I hope this helps...
Cheers!
P.S.
The debt bubble in the US has been bursting. It topped at an incredible 380% to GDP in 2009 and has by now dropped to 340% in spite of massive govt. debt increase. So, individuals and corporations have been paying off debt at a quite aggressive rate. Typically you don´t raise prices into a falling market which is why this latest rush from bonds to stocks looks a bit strange. Also, decreasing demand for credit has led to increasingly hopeless situations for more or less dubious portfolios of overleveraged financial institutions. It´s very strange. As the stock market rallies it devalues the assets of banks and other financial institutions. Which are overleveraged as it is. It´s almost like a fox gnawing off its foot to get out of a trap.
Stock and bond prices obviously tend to move in opposite directions. As stocks rally they signal stronger economic activity and profits ahead, leading to increased demand for credit which results in rising interest rates and thus falling bond prices.
This is a very big problem for financial institutions that are heavily leveraged against their capital. Never mind that part of their portfolio is pretty much worthless crap that isn´t priced to market.
It´s a very big problem for the mighty FED as well. As a matter of fact it is leveraged like 60-1 against its capital. It has capital of about 50 billion dollars against a bond portfolio of 3 trillion dollars. This is much worse than Lehman Brothers.
If money continues rushing out of bonds into stocks at the present rate I think the FED will be rendered technically insolvent fairly quickly. Except, that the brain-boxes that they are, last January they adopted an accounting change which allows them to book any losses on their portfolio as a liability to the Treasury, AKA the taxpayer. They would then simply book future profits against that liability and all would be well again. How they expect to balance this mess out is beyond me - frankly.
could the market gap up for the 3rd consecutive day in a row? If so it would be sure to hit S&P 122-123, but that could prove to be an exhaustion gap if it comes back down through the gap. I went short at pivot level #3 at SPY 121.44, but it then went up to pivot #4 at 122.14 on the nose. So volatile on the swoon I got out at break even and glad of it. this rally is getting a bit 'long in the tooth'.
Does it mean you should go long now, whereas you will take short position..Trade triangle is really lagging indicator
Chartwise, SPX swooned at the end of the day, retreating from 122.05 to 120.7, just as Adam suggested it might, but the index still managed to stay above the 55EMA at 119.12. I took part profits but held most of my calls and cinched up my stop. I'll double up if the market advances tomorrow or get stopped out with a profit if it tanks - unless, of course, the index collapses completely in overnight trading.
Overnight trading pisses me off. Traders can drop the boom on you and you can't get out of the way.
When the entire Global community needs a bail-out, who will the banking mafia steal from then? (maybe each other or will they just issue more currency to keep the game going?)
Did the trade technology miss this entire move ? If so, that is the problem with
momentum charts, like em but slow to act at times.
In my 20 years of trading experience, I have seen that longs can stay oversold for quite a while.
I would not be surprised to see 1260 before the next pull back. Especially with the dollar breaking down.
Chartwise, SPX is 1214+ which is the Fab 50% retrace from the July-Aug high... but then it is only 2pm. The index has already broken through a big resistance at 1193. As noted, if it holds above the 55EMA, the next Fab target is 1242. Who knows what will happen in the stock market? Not me. But there may be fuel for a further advance in the fact that there are still a lot of bears around who have yet to capitulate. My stop is 1190.
The Weekly Trade Triangles on the indexes have turned Positive.