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ES Morning Update October 27th 2017

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ES Morning Update October 27th 2017

This morning we are going to look at the 2 hour chart and as you can see the bulls did not do the smart thing but instead went down the wrong path by extending the MACD's both on this chart and the 60 minute chart up near the +2.5 area instead of rolling over and setting up some positive divergence.  This is a clear sign too me that we will have another pullback next week as this move up is too weak to extend much longer before rolling over.  The MACD's on the 6 hour (not shown) are barely above the zero line and kinda flat-lined but looking like they could turn back down fairly easy as well.  This again leads me to believe that we'll get another move down next week that should take out the low just made on Wednesday.  Now whether we make a higher high today (or Monday?) or a lower high is unknown but it's more a function of time then price as those MACD's keep pushing up without resetting lower to create positive divergence just means at some point soon (at the close today or Monday) they will run out of steam and roll back down.

If this lines up with the 6 hour too (and it's looking weak today so it could go either way next week) and the daily and 60 minute SPX charts then the move down should surprise the bulls and bears alike.  But for today I'm expecting this rally up to mostly hold as it runs for the double top to try and take out.  I do not know if it's going to make it up there today or push it out until Monday but it certainly is trying hard this morning.  My thoughts are that if we reach a double top today by the close the bears will short it and that would then push it up again on Monday through that double top to a higher high just under 2600, but if they hover around this area here all day the bears might not short and the bulls will stay long over the weekend.  That would then setup Monday to be a nice down day as bears wouldn't be aboard and bulls would be trapped.

So if we reach a double top then I'd expect more on Monday, or if we stay away from the double top I'd expect a move down to start.  SkyNet will figure it all out on how to move the market Monday based on how many people get long and short today I believe.  On the big picture I think the market is going higher but short term we could have another drop start early next week that might go as low as the 2500 area before turning back up.  Hard too say for sure but if it did drop first then we should have another powerful rally to over 2600 in November.  Will we see the 2600+ happen first and then a retest of 2500... don't know?  It's all about how many people are on each side of the trade I think.  If too many get short then we could see the run up first and then the drop.  If too many get long then we should see the pullback and then the run up later this year... like maybe for the Christmas rally?  Have a great weekend everyone.

ES Morning Update October 26th 2017

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ES Morning Update October 26th 2017

Surprisingly the bear flag played out yesterday and now we have a small bull flag on this 6 hour chart that is trying to play out right now as it's breaking through the falling trendline as I type this update.  The MACD's hit the zero area and are turning back up too, but on the 60 minute and 2 hour chart (not shown) the MACD's have risen from oversold (around -2.5) to about zero now on the 60 and -1.0 on the 2 hour chart.  So, while the 6 hour chart looks to be hooking back up these shorter time frame charts may need to rollover soon near this zero line and make a higher low (just needs to stay above the prior -2.5 area) to setup positive divergence for another day.  When I add in the lagging short term 60 minute chart of the SPX cash index I see it oversold as well but no turn back up yet.  The longer term view of the same chart shows MACD's still very overbought up near +4.0/+5.0 area from a peak of +6.0 back in early October.  So while the short term MACD's are still pointing down (in the -2.5 area) with no signs yet of turning up this tells me that today we should see fighting charts where the futures want to go up but the cash wants to go down.  And that leads to the rollovers of the MACD's on the futures around the zero line for the shorter term 60 minute and 2 hour charts.

Again though I expect a higher low if this happens to setup positive divergence.  As for the actual price level of the futures that's a hard one to call.  If the charts were all flipped I'd say we'd make a higher high as the market always favors the bulls, but since this suggests a lower low in the price levels of the futures with a higher low on the MACD's I'm not sure we'll see it today as the FED's cheat and hold the market up all the time and don't let the bearish setups play out like the bullish ones.  We hit support yesterday on that move down and I expect it to hold today.  So if the bulls are smart they will allow the MACD's to rollover near the zero line and setup that positive divergence for tomorrow.  But if they are not smart (and let's face it, they are very dumb animals that can't hunt for food themselves and have to be feed daily by farmer Janet... LOL) they will keep charging on upwards all day today and push those MACD's above zero to the point of exhaustion where they are sure to setup a larger drop Friday or Monday that will take out the current support low yesterday.

It would be much smarter to rollover today and go test that low and maybe pierce it by a point or so to setup the positive divergence, but my gut tells me they won't do that and will just keep running hard at full speed all day but not getting too far, but instead just trending water (aka... sideways action).  I've seen this rodeo before and the bulls rarely do what is logical.  They will push and push until they are fully exhausted and then the next move down the bears are going to kick them in the teeth on it.  It all spells trouble for the bulls I think as the best I could see them doing by forcing a continued move up today would be to double top or slightly higher high by Friday, whereas if they would drop back and do that positive divergence they could tag 2600 and beyond... but I just don't think they will play that card today.

My thoughts are that they will stretch the MACD's well above that zero line into Friday where it will setup a move down on Monday/Tuesday that will take out the current low yesterday and make it a distant memory.  Bulls will play this wrong today, I just feel it, and it will haunt them next week when the next drop could have been small but will end up being a much larger I believe.  Anyway, for today I expect chop as charts fight each other.  Just keep your eyes on the MACD of the 60 minute chart as if they push it to +2.5 area today (or thereabouts) instead of rolling over then the bulls are playing the dumb card as I expect them to do.

ES Morning Update October 25th 2017

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ES Morning Update October 25th 2017

Bulls are fighting really hard here to keep this down move limited. All they need is another day probably of sideways action to reset the charts back up. Yeah, it sucks for the bears as it seems almost all the bull flags work but the bear flags get manipulated long enough that they fail. It's all about time for the bulls as given enough of it this current bear flag will fail. Clearly it should work but I'm not so sure it will be allowed to? Once the MACD's on the 6 hour chart reach the zero area it's common for them to turn back up. So the bulls just need to keep the price sideways until that happens and then they can rally again

Of course failure to do so would result in a nice move down that should retest the prior lows around 2545 or so. Then this move down would be labeled and ABC of some degree. From there the bulls could put on another nice rally I think, but from current levels the rally should be weak. My thoughts are that we are simply at a crossroads where we should drop from the bear flag but manipulation is so common in the market now that I'd just as well call heads or tails with a coin as it's probably a 50/50 chance either way. But if forced to pick a side I'd go with the bears as I think the daily and 60 minute charts on the SPX cash are lagging behind the futures and are still quite overbought. So that pressure "should" allow the bear flag on the futures to play out.

ES Morning Update October 24th 2017

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ES Morning Update October 24th 2017

We had a decent little pullback yesterday and along with the one last week we are clearly showing signs now that the bulls are tired. Today we are a little before the open, which is totally expected. Now the question will be whether or not the bulls make another higher high or just a lower high? There's some nice negative divergence on the MACD's here of this 6 hour chart so we are likely very close to a top now. Whether it's yesterday, today or some other day this week is still unknown but it's close. I'll keep it short and simple for today. I'm looking for a move up, but small today. It's not one I would play as it's not clear if we are going to rocket on up to another new high or fail. A failure today would likely lead to another move down tomorrow but I won't rule out two days in a row of the bulls here trying to make another higher high before giving up the ship and letting the bears take it back down again. Topping is a process that can linger for awhile but it certainly has all the markings of one being formed right now.

Is the Fed Getting Cold Feet about the QE Unwind?

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Is the Fed Getting Cold Feet about the QE Unwind?

Curious things are happening on its balance sheet.

The last Fed meeting ended on September 20 with a momentous announcement, confirming what had been telegraphed for months: the QE unwind would begin October 1.

The unwind would proceed at the pace announced at its June 14 meeting. It would shrink the Fed’s balance sheet – “balance sheet normalization” it calls that – and undo what serial bouts of QE have done: gradually destroying some of the money that had been created out of nothing during QE.

The pace of the shrinkage would be $10 billion a month for the first three months, and then it would accelerate every three months until it hits $50 billion a month at this time next year. That was the announcement.

Reality Check

Thursday afternoon, the Fed released its weekly balance sheet for the week ending October 18. We’re now two and half weeks and three weekly balance-sheet releases into the QE unwind period. How much has the Fed actually reduced its balances sheet?

  • Total assets on Oct 4:  $4.460 trillion
  • Total assets on Oct 11: $4.459 trillion
  • Total assets on Oct 18: $4.470 trillion

You read correctly: Since October 4, the balance sheet gained $10 billion, all of it in the week ending October 18.

The Fed is supposed to unload $10 billion in October. But curiously, so far, it has done the opposite. This chart shows the balance sheet movements so far this year. Note the jump in the last week:

The chart below shows the Fed’s total assets over the entire QE period from before the Financial Crisis through the currently missing QE unwind. There was a mini-unwind after QE-1 and that was about it:

As part of the $10 billion that the Fed said it would shrink its balance sheet in October, it is supposed to unload $6 billion in Treasury securities and $4 billion in mortgage backed securities. How did that go so far?

Since October 4, the Fed has in fact added $176 million in Treasury securities and now holds $2,465.6 billion of Treasury securities of all maturities, a new all-time record high, and there is no sign of any unwind:

And even crasser: Since October 4, the Fed has piled on $9.8 billion in mortgage-backed securities, and there is no sign of any unwind either:

In fact, looking at the Fed’s Open Market Operations (OMO), the Fed’s “Trading Desk,” as it calls this entity, was very busy nearly every day in the MBS market, buying between $400 million to over $2 billion of MBS per day.

The Fed has done this since the end of QE in order to keep the MBS on its balance sheet about even. MBS securities constantly forward principal payments to their holders (as underlying mortgages get paid down or off), and unlike regular bonds, they shrink until they’re redeemed at maturity. To keep the MBS balance steady, the Fed has to constantly buy MBS. So this just continues its routine.

But clearly, there is no sign that the Fed has backed off from its purchasing activity – which leaves several possible conclusions:

  1. The whole QE-unwind announcement was a hoax to test how stupid everyone is. But I doubt this.
  2. The people running the OMO are on vacation and have been replaced by algos or interns, and they just keep doing what the folks now on vacation have been doing for years. I doubt this too.
  3. The FOMC told the public what it wants to have done but forgot to tell its own people at the Trading Desk. I doubt that too.
  4. There is willfulness in it – a sign that they’re not ready, or that they want to give the markets more time to get used to the idea of it, etc. And this could be the case.
  5. They’re seeing something that worries them, and they’re holding off for now to get a clearer picture. But I doubt this because their decision to commence the QE-unwind on October 1 was unanimous, and since then nothing of enough enormity has changed.

Whatever the reason, the announced “balance sheet normalization” is not taking place. The opposite is taking place.

By contrast, when QE was started in late 2008, the Fed kicked it off with an explosive vengeance. The folks at the Trading Desk didn’t dillydally around. In the 10 weeks between September 3, 2008 and November 12, 2008, they purchased $1.3 trillion of securities, ballooning the balance sheet by 144%.

Sure, some people may say that a few weeks are not enough time to judge the Fed on its QE unwind. But this is not something we’re going to ignore. And so far, the Fed is doing the opposite of what it said it would do.

ES Morning Update October 23rd 2017

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ES Morning Update October 23rd 2017

Another week has gone by and almost another month too.  Hard too believe how fast time flies.  Anyway, not much to say this Monday morning.  The 6 hour chart is still pointing up strongly on its' MACD's while the 60 minute and 2 hour charts rollover from their peak and will setup negative divergence on them today.  Just from the looks of where I think the MACD is going next I'd estimate that the market will top out later this week.  We need the MACD's to top out first and rollover and back up a hair to create some negative divergence on them I think before the market tops out and allow a nice pullback.  In the meantime we might see some 10-20 point moves down but they shouldn't hold the bulls back.  It should just be part of the topping process, which we are in now.  It looks more and more likely now for 2650-2727 to be the topping area, which was called my Oscar Carboni's OMNI back in January of this year.  I have to give him credit as I certainly didn't see us rising that much back then.

For the short term though we should stop before 2600 and have a decent pullback before going back up later and busting through it.  Everyone now see that level as being hit so it's common to pullback before reaching it.  The range is usually within 10-20 points from past even number targets I've seen.  That projects 2580-2590 this week and then a nice pullback.  But, keep in mind that there should be several attempts made so a fast 10-20 point then rally back up and drop again and rally back up could happen.  It's that choppy action you see when topping.  We may or may not see it this time as we still aren't at the 2650-2727 topping area, which we should see it there.  But this even number target of 2600 might not have too much shaking going on, and instead just rollover for a decent pullback without much notice.  For today though I don't see much going on.  It looks like another tight range day where the bulls don't advance much and the bears might see a few points in the red... but nothing to brag home about.

ES Morning Update October 20th 2017

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ES Morning Update October 20th 2017

Yesterday I thought we would take an ABC move down to the FP on the SPY and then back up for a new all time high attempt.  But, we only got one wave down at the open and this morning we see the new all time high.  At this point I think everyone should be super bullish as I'm sure a lot of bears were killed on that rally yesterday and new all time high (again) this morning.  And that tells me we should have another pullback, but I doubt if we see it today... early next week is most likely.  The bulls are on a tear for 2600, 2700, who knows?  But this fast squeeze up isn't likely to have much staying power in my opinion.

My thoughts are that we'll put in negative divergences everywhere today by the close and setup Monday or Tuesday for a nice pullback... and I don't mean 10-15 points.  This next pullback should take out yesterdays' low at minimum as it needs to shake out the bulls.  The bears will probably sit on the sidelines and watch this move unfold but not short it for fear of getting squeezed hard again.  That's why you know it will go deep as there's won't be many bears short.  So for today I'd expect the bulls to hold the new ground they've reached and keep trying to squeeze out a little more, but as long as they close this thing up high (doesn't have too be "the high") and NOT do the pullback today I'd look for it to start as early as Monday but could happen on Tuesday.  It's hard to know exactly when but that's my estimate based on what I expect the various charts to be looking like on that day.  After the pullback, who knows?  It's too soon to guess about that.  Probably a run up to another higher high but I won't speculate on that until we get there.  Have a good weekend everyone.

ES Morning Update October 19th 2017

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ES Morning Update October 19th 2017

Looks like the bears finally woke up as the blue rising trendline of support brokedown.  Now we need another rally into tomorrow or Monday that puts in a double top or higher high and that should then allow for a deeper pullback to start.  But since today's gap down open is the first real action in a long time I would fully expect the bulls to "buy the dip" and take us back up.

Now, with that said I don't think the low is in right at the open this time as there's a FP from a week ago that suggests this is an ABC move down and that this open will just be the A part with the B up likely lasting at least early today if not all day.  It means we should see a C wave down to that FP later today or Friday before reversing back up to make another higher high or double top.  However, here's where it gets tricky.  The daily chart (on the SPX) needs to create some negative divergence I believe as it's at a peak and rolling over on its' MACD's but it's Histogram bars are almost at the zero line where they typical turn back up from a make a lower high (and the MACD's do the same, currently at +20 but should fall over time) while the price makes a higher high.  Back to the tricky part... a failure to make that higher high in the next week would put a bearish tone on the market I believe, which would surprise the bulls.

But for now I'm just expecting the FP on the SPY to be hit by tomorrow at the latest and then back up for that higher high into next week.  Bulls are still in control here until Aunt Janet turns her back and pulls the free money out (the hidden QE that's still going on).  For today I'm just expecting this B wave up to consume most of the hours of trading if not all of them as we wait for it to end and then the C wave down to start (probably tomorrow morning) to end this ABC move down, which again should end at the FP on the SPY I posted in the chatroom last week.

It could happen all today I guess but I've found that SkyNet doesn't want bears to get any good shorting opportunities throughout the day and forces them to take an overnight trade, which it then can manipulate and shake them out the next morning with a gap up first and then rollover.  But I don't think it will be that easy this time for SkyNet as it told us the downside target last week via the FP on the SPY, so if we rally up into the close today then I'd expect the B wave up to end there and a C wave down to show up Friday morning.  From there the market should rally up next week to make another higher high, at least that's what the daily chart suggests I believe.  Will it happen or will it truncate and fool the bulls?  Only time will tell.

Goldman Sachs’ chief equity strategist says there is an 88% chance we’re heading into a bear market

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Goldman Sachs’ chief equity strategist says there is an 88% chance we’re heading into a bear market

Goldman Sachs has circulated a fascinating but scary research note to clients suggesting that the probability of stocks entering a bear market in the next 24 months currently stands at about 88%, based on the history of previous bear markets.

The note is titled “Bear Necessities. Should we worry now?” It is an exhaustive, 87-page dive through macroeconomic data and stock market activity going all the way back to the early 20th Century. It was written in September by London-based Chief Global Equity Strategist Peter Oppenheimer, and European strategists Sharon Bell and Lilia Iehle Peytavin. Most of their data focus on the US S&P 500 index of stocks – the largest and most-followed of the share indices globally.

Here is the historic context. The S&P is currently the second largest and longest bull run in history.

The index is also relatively expensive, the Goldman trio says. The aggregate valuation of the S&P 500 is now in its 88th percentile, as measured since 1976, according to Goldman’s calculations. The median stock is in the 99th percentile.

The trio calculated a risk index based on the Shiller price-earnings ratio (the price of S&P 500 stocks divided by the average of 10 years of earnings, adjusted for inflation), the US ISM manufacturing index, unemployment (very low), the bond yield curve, and core inflation.

The resultant “GS Bear Market Indicator” is currently flashing at 67%. The indicator typically hits highs right before a bear market in US stocks appears:

Historically, when the indicator is at 67%, there is an 88% chance of stocks falling into a bear market in two years’ time, the Goldman analysts say:

However, the chance of a bear growling into view in the near-term remains low — just 35%.

Bear markets are triggered in three different ways, Oppenheimer et al argue:

  • “Cyclical” bear markets are trigged by rising interest rates and recessions;
  • “Event-driven” bears come from negative economic shocks like war or emerging market crises;
  • “Structural” bears come from financial bubbles.

Depending on your point of view, all three of those triggers are hovering on the horizon: The Fed and the Bank of England are both signalling interest rates will rise; US President Trump is threatening military action in North Korea; and plenty of people think the low-interest rate environment of the last 10 years has inflated asset bubbles in stocks, real estate and property in Europe, and private equity tech startup valuations.

However, Oppenheimer also believes that a bear market is currently being held back by low inflation, which in turn will force central banks to keep interest rates very low. “Rising inflation remains elusive,” he wrote in a recent column for the Financial Times. “Market prices continue to reflect a low risk that interest rates will increase enough to trigger a recession in the near future.”

If a bear market does happen it will be a roller coaster ride. Goldman created this diagram based on an average of historic data. Typical bear markets feature a false “bounce,” in which stocks decline suddenly but then recover, reassuring investors (who then get crushed in the months afterwards) or giving clever investors a second chance to get the heck out of stocks.

Buckle up!

ES Morning Update October 18th 2017

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ES Morning Update October 18th 2017

Well, the futures have decided to ride the blue rising trendline up instead of turning over the ball to the bears.  Not that this wasn't expected as we all know this market favors the bulls over the bears.  I do not know when this will end but it will end badly when it does as the rising volume is the lowest I've ever seen.  Yesterday on the SPY it barely had 27 million shares traded... that's insane!  A health bull market should have well over a 100 million so this is clear signs too me that it's running on fumes here.  But, it will continue to do so until everyone turns bullish and unfortunately there's still a lot of bears out there.  One bad news event could drop this market hard and fast but since "they" control the news we shouldn't expect that to happen until the market grinds up to whatever new high is needed to get everyone bullish.  Is it 2600, 2700... I just don't know the answer.  I'll only say that this 6 hour chart is bullish as the MACD's did finally cross back positive and are pointing up from the +2.5 area right now.  But I don't think it will go back up to +7.5 where the prior high was in early October.  I only expect a lower high while the market makes a higher high.  This would setup negative divergence on the futures and allow for a top to be put in.  When will this happen?  Good question, but from the looks of this chart it could continue rising another 1-2 days fairly easily I think.

Now this all assumes we continue up and don't lose the rising blue trendline, which looks to be the plan right now.  However, I don't see many ways to play this move to the upside (nor would I want too) as it's too slow for my blood.  The decay on call options wouldn't be worth the risk and then there's still some worry of a gap down some future morning.  It's pretty clear to me (from the extremely low volume on the SPY) that traders aren't playing this market right now.  They are sitting in cash or trying to pick a top and shorting it.  But the super low volume speaks for itself... it's just bot's playing ping pong with other bot's as traders just can't make money in a market so quiet and without much movement.  The charts look like the EKG of a deadman right now, so this market needs a shock to it to get the heart beating again as this life support is failing.  My thoughts for today are more of the same ol' grind with more extremely light volume.  Nothing to look at here folks, move along...

ES Morning Update October 17th 2017

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ES Morning Update October 17th 2017

Well gang... not much to say this morning.  Yesterday was another Ground Hog Day and today is still unknown.  You'll see now that the market has been riding the rising blue trendline as I guessed it would.  The question left is... will it bust on up another 10-20 points from it or breakdown through it?  It's really a tough call here.  On the SPX daily and 60 minute charts they show a market still overbought, suggesting the next big move will be down.  But it's so controlled that picking exact time and date that it's going to drop seem futile as the market just continues to grind up a little it day against logical reasoning.  Anyway, the next big move in my opinion should be down.  I fully expect that 2462 gap on the futures to get filled and I would not be surprised if we don't reset 2417 where the prior low was.  But telling you when it's going to start is something I can't do.  My recent thoughts have been that we'll drop about 20 points or so first, then back up again for a another higher high and then back down to fill that gap.  Whether it happens like that or just drops from here and fills the gap is a mystery to me.  But a breakdown of that rising blue trendline seems more likely today then a 10-20 point bounce off of it.  That's all I got for today unfortunately.

ES Morning Update October 16th 2017

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ES Morning Update October 16th 2017

Looking at the 6 hour chart this morning its' looking bullish to me.  The MACD is about to cross back up positive after flat-lining in the +2.5 area for several day.  Of course it could also be tired from many days sideways without a successful turn back up, so it could rollover too.  But, it's well known that the market is rigged for the bulls.  So when you see bullish setups, like bull flags, inverted head and shoulders, cup and handle patterns and a MACD getting close to crossing back into positive you have to think that odds favor them working out 90% of the time.

On the flip side I doubt if they work out 50% of the time for bears.  Now, that doesn't mean I would go long up here.  I think this market is super stretched to the upside and needs a pullback soon.  But this bullish cross on the MACD could support another 10-20 move higher before getting tired again.  You can also see that it's really close to the lower blue rising trendline of the rising channel now.  That should act as support for it to bounce off of if it plans on going higher.  Failure here would be bad for the bulls as it would allow a nice 20 or more point pullback.  I'd like to think it would allow more but the buy the dipper gang probably won't allow it.

I personally don't see much support on the downside until 2490-2505 but I seriously doubt if we drop that far on the first break of that rising blue trendline of support.  Since these are 6 hours bars it could drag out another 1-2 bars before touching the line, which puts us into Tuesday.  So today could be a sideways day until the bulls decide if they have enough mojo to muster up another 10-20 points or if they want to pass the ball over to the bears for a small pullback.  Odds favor the bulls as they are the chosen team but it's not clear which way we are going today.  Since it's a Monday and the bulls have around 1-2 more candles until hitting that blue trendline my thoughts are that they will go sideways again to up.

The strength of the up part should give us clues to how strong or weak they really are.  If slow on the move up, meaning more of the same old grind, then it's weakness... and that will lead to a pullback at some point this week.  If strength is shown by the bulls then we might only see more sideways trading after a fast 10-20 point move up, which just builds a base for another launch higher at some future date.  My thoughts... we'll grind up slowly and then pullback fast but not too deep, thus making a week full of some action for a change.  But I doubt if we see 2500 this week... next week, who knows?

ES Morning Update October 13th 2017

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ES Morning Update October 13th 2017

The futures are up a little this morning in what looks like it "could" be the squeeze higher I've been looking for?  If we tag on another 10-20 points and reverse then today might be similar to 8/8/17, but if it holds all day long into the close then it might be pushed out until Monday.  So we are looking for top today or Monday I think as everything is setting up nicely now to complete wave 5's of various degrees.  This 6 hour chart shows a MACD that is curling back up this morning, but I don't expect it to race up to +7.5 area again.  It should instead put in a lower high, and since it's a 6 hour chart this could drag out over the weekend and into Monday before rolling back over.  It's hard to chase this up but it's just as hard to short it too early.  No doubt the bulls climb a wall of worry as each day they gain a few more inches as the bears can barely pull them back one inch from time to time.  Short update for today. I'm looking for a slow grind up all day that holds until the close and most likely carries over into Monday.  Kinda pointless calling levels but the norm is 10-20 up with a bullish setup like we have currently.  Have a great weekend and look for a top on Monday (possibly Tuesday, but low odds) and then pullback to 2500 area would be my best guess.

ES Morning Update October 12th 2017

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ES Morning Update October 12th 2017

Some weakness this morning but I still don't think the bulls are ready to give up just yet. I'd like to see some exhaustion type squeeze up before I think we'll rollover... kinda like the 8/8 pop and drop. Now it doesn't have to happen in the morning via a gap up (which would be preferred), but I do think we need one to show up. Maybe it comes from a slow grind up into the close today or Friday? Either way I do think it's coming as the longer we chop sideways the better defined the bull flag is... but if it doesn't pop soon it could produce a failed bull flag and just drop hard. I'd give it until tomorrow to see if it's going to play out or not. We all know how rigged the market is in favor of the bulls so I do expect it to work again. Other the that I don't see much clues in the charts for the direction today. They look bearish here on this 6 hour chart but we are still trading sideways in a tight range, so until we breakout one direction or the other it's just a flip of a coin here. My thoughts are still that we are close to a top before a nice pullback happens, but whether that is today or not is just not something I know the answer too? I would like to see that pop of 10-20 points higher as I think that would kill the last bear, but it's not looking likely for today. I'll end it here as I've said everything there is to say now in the prior posts. A top is near, like within days I think, but nailing it exactly is really hard.

Goldman Sachs considers trading bitcoin & other cryptocurrencies

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Goldman Sachs considers trading bitcoin & other cryptocurrencies

A new trading operation dedicated to digital currencies is being explored by Goldman Sachs, sources told the Wall Street Journal. It could be the first blue-chip Wall Street firm to deal directly in the growing yet controversial cryptocurrency market.

“In response to client interest in digital currencies, we are exploring how best to serve them in this space,” said an unnamed Goldman spokeswoman.

According to people familiar with the matter, Goldman’s effort involves both its currency trading division and the bank’s strategic investment group. The firm sees bitcoin’s future more as a payment method rather than a store of value.

Sources also said Goldman’s effort is in its early stages and may not proceed. The firm’s interest, however, could strengthen bitcoin’s position as digital currencies were initially viewed as havens for illicit activity.

Big banks such as UBS, Barclays, ING, Goldman Sachs and BNY Mellon have recently announced ventures into the blockchain technology that allows digital currencies to function and be transferred safely.

BNP Paribas has said it is looking to add bitcoin to one of its currency funds and has been doing "beta testing" involving the cryptocurrency.

Societe Generale and JPMorgan even published job offers for an IT developer and technician on bitcoin, blockchains, and cryptocurrencies.

Morgan Stanley Chief Executive James Gorman said bitcoin is “obviously highly speculative, but it’s not inherently bad.”

According to research firm Autonomous NEXT, around 70 hedge funds are currently investing in cryptocurrencies.

Control over virtual currencies’ trading platforms has been tightened recently to prevent them from becoming money laundering sites.

Last month, Chinese authorities cracked down on cryptocurrencies, ordering the country’s exchanges to suspend operations. Beijing banned initial coin offerings (ICOs), referring to them as an unauthorized fundraising tool that may involve financial scams.

The move was followed by South Korea, with the country’s financial regulator saying it will ban money raising through all forms of virtual currencies.

In July, the US Securities and Exchange Commission warned that some ICOs should be regulated like other securities. Authorities in Singapore and Canada have issued similar warnings.

ES Morning Update October 11th 2017

Red
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ES Morning Update October 11th 2017

Another day of the same... just waiting on the Fed it seems.  I think we are super close to a top and few nice pullback, meaning a multi-day one.  On the bull side I think they could muster up another 10-20 point on the upside if some positive news comes out from either the FOMC meeting or the tax reform bill that Trump is pushing.  Remember, the market has already built an interest rate hike for this December and the tax reform being successful.  If either of those fail I think we'll see a good correction.  If both fail... it could get bloody!

For today though I'll look to add more shorts if I think the setup is right.  For that to happen I'd like to see a muted reaction from the meeting or a fast spike higher that falls back down fast but still closes green for the day.  Meaning if it kept falling and closed red I wouldn't add to my shorts but look for a bounce back up on Thursday to close green.  I'd rather close green today with a small move up that should be an exhaustion move.  It's tricky as we don't want any news to be too positive or else it's momentum will carry over into Thursday.  Best to just have a "nothing" reaction and move up a hair to close a few points positive.  Then tomorrow let everything settle in with traders so they can come to the conclusion that they sell as we are too overbought this high up to hold it without some kind of pullback.

ES Morning Update October 10th 2017

Red
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ES Morning Update October 10th 2017

Futures this morning are up slightly but still act like they are waiting on the FOMC minutes tomorrow.  We might see another squeeze higher if the various time frames on both the ES Futures and SPX Index get in-sync together.  When I look at the 6 hour chart on the futures it still has the bearish cross from previously and a wide distance between the two MACD lines. But it's at a point where it "could" turn back up and make a negative divergence by putting in a lower high tomorrow on it while putting a higher high in the actual price of the futures.  Now at this level of being so overbought I'm just not expecting too much more left for the bulls.

They are expecting the Fed's to raise rates in December and have priced that into the market.  So, all that needs to be said is some comment tomorrow from Janet Yellen that just gives traders the slightest idea that the Fed's might not raise those rates after-all.  Do that and you'll see some selling start, and heavy selling most likely.  Naturally I don't know if that's what Yellen is going to do but just keep in mind that any small shock too this market could cause a fast drop as traders are just too bullish right now.

This market reminds me of the mid-late August period of 2015, and there was a Fed meeting back then too. It was on August 19th, and I remember how the market rallied sharply right at the 2-2:30 pm time period around the release of the minutes of the meeting.  It had already put in a high for that week on Tuesday but came close on that spike rally to double topping it.  Then it reversed back down and closed red for the day... something unusual for an FOMC day.  Of course you know what happened the next 3 trading days.  Now I'm not saying I expect a repeat of that but this market "feels" like that time period and has similar setups.  Some differences are that they did the Fed meeting back then on the 3rd week of the month where the monthly options expiration was, and this time it's being done a week before the monthly expiration.

Also note that tomorrow is an "eleven" day and we all know how the elite like that number.  It's used in many rituals, in fact it was used for the recent Vegas shooting ritual where they did it on a 111 day (10th month is a One as you drop the zero, then 1st day of the month is a one and lastly we are in a 10 year as 2+0+1+7=10 and that is one as well).  So "if" they plan on doing something to spook the market they have the right day setup for the ritual.  I'm looking for more number codes in the high/low and open/close of the DOW, SPX, SPY, etc... for that day or today as well.  A nice 22,777 close on the DOW today or tomorrow would be a great code from them... not saying they will do that, but I am looking for signals now as we are clearly close to a pullback of some degree.  Whether that's a full blown mini-crash, real crash or just a nice drop is unknown... but I do expect an important top around this meeting.

For today it's not clear of the direction.  It looks like we could rollover later in the day and close slightly red versus opening up this morning slightly green.  I wouldn't bet on it just yet as we are still in the zone where that fast and final squeeze higher could happen.  I'm just waiting until the end of the day to see if we rally and squeeze out the bears or trade mostly sideways and leave the fast move up for the actual release of the minutes tomorrow around 2-2:30 pm where Janet might say something to cause the reaction.  Again though, I do not think the Fed's will raise rates in December and I think that will be the cause of the large drop in the market.  Now "when" that news comes out (assuming I'm correct?) is still just a guessing game.  I'm guessing it will be leaked (on purpose of course) sometime this month versus November, and that the selling is about to start later this week and pick up steam as we go deeper into the end of October.

ES Morning Update October 9th 2017

Red
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ES Morning Update October 9th 2017

I'm not expecting much today as it's Columbus day here in America so while the stock market is open I'd think we'll still have little trading going on as the bond market and banks are closed.  So, hopefully the bulls can just hold the pig up and get more overbought so the bears can take control this Wednesday or Thursday.  We do have another FOMC day this Wednesday but it's only the reading of the minutes from the September meeting.  However, sometimes the market still waits to see if Yellen with add something else that will let traders know how to best position themselves.

Right now traders are all long expecting a rate hike in December, but if that doesn't happen and it's already "priced in" (which it is) then traders will see the economy as weak and dump the market.  But that meeting is still awhile away so unless word leaks out this Wednesday we might still only see small pullbacks and then more up until we get closer.  But that's too far out to speculate on right.  For this week let's just look for a top on Wednesday or Thursday I believe.  But today and tomorrow we might just chop around more as traders again wait like pigeons outside a restaurant for crumb drops from Janet Yellen.

ES Morning Update October 6th 2017

Red
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ES Morning Update October 6th 2017

Ok, from the looks of the charts we should get our first small pullback today.  Both the 6 hour chart and 2 hour chart show MACD's rolling over with the 6 hour MACD just starting and the 2 hour already started.  Now since it's common to see a turn back up on 60 minute MACD around the time it gets to the zero level we could see happen within an hour or two of the open.  But, the downward pressure from the larger time frames should keep the turn back up small and not allow the price to run up to another higher high.  What I'd expect is a small bounce in the morning that struggles all day to keep from falling more.  Then later in the day I think we'll rollover again and go lower.  How far you ask?  I don't see much more then 10-20 points, so I'd look for support to hold in the 2530-2535 area.  There's also the rising blue trendline from the old channel that should give some support.  It could be the area where we first turn back up and ride it all day until finally rolling back down later today?  Too hard to say for sure as there will be dip buyers come in to keep this move down small.  But they should only see a lower high on the bounce and get taken back out on the second move back down later in the day.

So, what about next week?  Well, if today does as I expect and close down a little then we should rally back up on Monday again.  Does it have to make a higher high?  No, I don't believe it does.  But it could for sure but I don't think it will matter either way as next week we should start the pullback that should first retest the 2500 level and probably bounce around there for awhile and then break to go fill that 2462 gap.  But bear in mind that the 2500 level will be hard to give up, and it might dance on it for another week before breaking... but I do think it breaks.  Next week we should see the bulls put in another slightly higher high on Monday or fail and just double top it or lower high.  But that top should last for awhile as we go into mid-October and beyond.  I'm not saying it's going to be the final all time high as there's just no way to know that right now.  The monthly chart suggests we go much higher, like maybe SPX 2700-3000 or more?  But that doesn't mean we go straight up.  We are overdue for a pullback and it should turn into a nice correction of at least 5-7%, if not more.  This should happen in October and/or November, and then after that we should resume the bull market until they finally top out in 2018 sometime is my best guess.

For now though I'm just trying to catch the correction and I do think it will start next week.  We just need to see this tiny pullback today and one more move back up Monday or Tuesday... call it an "exhaustion" move.  Whether it's a lower high, higher high or double top is no important in my opinion.  Whatever it is I think it will mark the last move by the bulls before a correction starts.  Naturally the correction could take weeks or more but with 3 flash crashes in 2016 and 1 flash crash in 2015 I wouldn't be surprised either if the move was fast and surprised everyone.

Again, I'm not saying that I'm expecting another flash crash as I just don't know.  But, the market is certainly setting the stage up for one... that's for sure.  Extremely low buying volume, bearish three months of the year, and pre-pricing in an interest rate hike for December spells a house built on sand too me.  Plus there's Crazy Kim in North Korea that could do more missile tests starting next week on the 10th, so there's plenty of things that could blow this house over.  Anyway, for today I'm looking for an early pullback of 1-2 hours, then a bounce that should be weak and should fail later today and roll back over.  Have a great weekend.

ES Morning Update October 5th 2017

Red
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ES Morning Update October 5th 2017

Not much to add from yesterdays' post and the day before that and the before that and etc...   The futures are still climbing a inch at a time day after day and repeating the same pattern of sideways to slightly up throughout the day.  Until Bill Murray can get it right and break this cycle we remain repeating Groundhog day again and again.

However, there is some hope for the bears as seen on this 6 hour chart of the ES Futures.  You'll notice we know have a bearish cross on the MACD's, and while that's no guarantee we are going to go down in price it usually puts a cap on the bulls going up much further.  So sideways to slightly down should be the plan for today and at least Friday.  You can look back at prior times when there was a bearish cross and you'll see about 6-10 candles of sideways action and one time the price just rolled over and dropped 30 points or so.

Will we get a big drop from it or a sideways move is unknown, but I think we'll go sideways first and do the big drop next week.  But, after the sideways action there still could be one more day up where they "pop and drop", so don't panic if you see it as it's very likely a fake out (this only applies as long as we have that bearish cross and a MACD that is dropping lower).  Considering tomorrow is the end of this week we might see some small selling from traders that don't want to hold long over the weekend.

So it might close down a little tomorrow, or early down and back to flat or small green at the close.  This would be the ideal situation for the bears as it would set Monday up as a possible gap down day.  Right now my gut thinks Monday won't be much of anything and we'll start down on Tuesday.  This move down coming next week is the one I think will fill the gap around 2462 on the futures.  But I'm getting ahead of myself so let's get back to today.  I see more of the same small movement all day, mostly sideways.

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