Mission Accomplished

As you can see from the chart, there is now an exit signal displayed coming into today. As I had stated, this signal was a short term signal that works over a few days period of time. I exited most of my stock trades on the close yesterday with a couple left to exit today at the close.

It does appear a potential short term sell signal will generate at the end of today, but we need a strong close for that to happen. Bigger picture there is a mixed bag here. Some of the indices are showing commercial buying and some are not. It is certainly possible we could have an upmove here. However, the trend remains down overall so I am just looking to sell strength when it shows up into that downward trend.

Keep in mind that there is a general bias to the upside above the 200 day moving average and to the downside below it for individual stocks. As a result try to trade in that direction in general. This is true basically because many fund managers really watch that average so it almost becomes a self fullfilling prophecy for it to work.

The 200 day has no edge in futures trading at all, it is a stock market phenomena.

We have a short term buy signal here as displayed for the Stock Market with the green arrow on todays bar. You can see from just looking at some of these signals that they generally give us a move over the next 2 to 5 days after triggering.



I think this sets up a bounce here that will set up a great sell setup in many markets mid month or so. Bigger picture I think this next down move could be significant but we will just have to see how it sets up after this bounce. This particular signal without getting into too complex of an explanation is based on the VIX.



I do also expect Bonds to decline as this rally occurs, setting up a bigger picture buy in that market. Many of the commodity markets have been absolutely obliterated in the last week, Energies and Grains in particular and Metals. This confirms the resumption of their downtrends, so rallies in all of them are selling opportunities.

After a day like yesterday it is usually important to not get so tied up in one day and to view things in a higher time frame. I know these charts are hard to see detail in, so just focus on the bigger picture. As nice as this rally from the March lows which I did call has been, it is still a rally in a longer term downward trend.





The red arrows indicate a proprietary combination of several things that tell me when to short the market. I also have them for buys but as you can see none of them show up on the chart which speaks loudly just by itself. You can see that on the way down they worked well, were a bit early on the way up. This is typical, they are not designed to pick exact spots, they are alerts to look for entries. We have been flashing these for awhile now, so once we find ourselves in July and in a known seasonal down period, have sell signals in a long term downtrend, that means we need to be looking to short individual stocks and the indices. This is what I have been doing and will continue to do until this picture changes.





If we combine this with what appears to be a top in commodities and currencies, and low in bonds, everything speaks in the same direction, lower prices for stocks. I posted about a month ago that it was time to get out of stocks, and we did rise a bit more from there. That was a general comment and not a day trading comment. It was made based on what is displayed here. It would be better to have the bottom pane more bullish which is actually a bearish signal. Fading sentiment is what we want to do, not go with it. The shift toward the emini's with commercials is underway and that weekly chart shows a more bullish reading with sentiment, which is bearish for stock prices. The preponderence of the evidence suggests down. It is possible that if during this decline the sentiment gets really negative it would support a test of the low and another leg up. That is something I will be watching as we move lower.



Big picture I think 2012 is when the ultimate low will be made and it will represent one of the greatest buying opportunities of all time. Between now and then we will have good swings both ways but I expect the big picture trend to remain down. If things develop in a way to change this view I will post something here to indicate my change in posture.





One of the very interesting developments is the very tight link between stocks and virtually everything else that is traded. You can watch intraday and when the dow rises literally everything on the board rises, and vice versa for declines. I have never seen anything like this and what it tells me is that the only thing that has really improved in the economic picture is that we have had a stock rally. As a result, when that appears to falter, everthing else that has been artificially lifted by it also falters.





Intermarket relationships tend to come and go making it impossible to model a trading approach after them, but I find this particular link very interesting. I just think it foretells of trouble not prosperity. There is really no fundamental reason for this link to be this tight.

What the Buck!

Here is a market that has confounded me this year so far. You can see the green arrows on the screen of the weekly chart of the Dollar Index. These are proprietary combinations of factors that dictate buying a pullback in an uptrend, some have been good, some have not.

There is very good reason to believe that we have another big leg up in this market coming by historical cyclical analysis. However, we are still in a shorter term downtrend. There is alot of jawboning about economic reasons as to why the dollar should decline. There are many that make sense conceptually, however I do not trade off such things. They are way to hard to quantify risk with and often can take years to play out. Also, I am of the belief that we have entered a long term deflation cycle that started last year and should continue for some time, so the inflation skit does not mesh with that view. I think the inflationary things the government is doing will just slow the rate of deflation, which behind closed doors is their real goal.

If we look at this chart we do see the commercials in the second pane green line at the top, being heavy buyers on these dips. This is bullish. In a perfect world my small fries with sentiment would be more bearish. You can see rallies have occurred when the readings on the bottom pane have been low. It might well be that we need to blow out these recent lows to get that sentiment more bearish to form this low, I am not sure. I am looking for buy patterns to get long here and have just not seen any yet.

I said in my last post that I thought the bond market has a ways to run and as you can see it is doing so. Pullbacks are a buy in this market now likely through October. I had stated that we needed a higher low to confirm the trend change and as you can see we have gotten that now, so the trend is up, buy the dips. Do not get tied up in this bullshit from the gold bugs about how interest rates have to sky rocket based on all the money we are printing, blah , blah, blah. I would bet I make more money on one good trade than these clowns do in a year. Although they do charge a 30% commission, so I guess they are not that dumb. They can snooker the public better than most people.

Regardless of any fundamental analysis we might do the price action needs to confirm that or it is all bunk. The trend is up now so until it breaks back down, buy the dips and tune out the noise.

Also most currencies look like they are topping here which means the dollar is likely to have an upleg here which would be consistent with the long term cycles.

After finishing my last post I scrolled and saw than in the first week of June I did mention that long setup in Bonds. Here is the trade I made just exited this morning. I do think that this market has a long ways to run on the upside. This trade was exited simply because it hit a profit target objective and was against the trend.

We still do not have a higher low or retest point yet which would confirm a trend change. All we have so far is a sharp counter-trend move. When you trade aggressively against the trend like this you need to take profits sooner to stay alive. I am looking for a dip now that forms a higher low than the one on this chart, and will look for a buy spot if that happens.

I mentioned in my last post that a minor sell signal showed up for the SP 500 and was worth taking. Displayed over to the left is the result of that trade. I used a smidge of discretion exiting as it technically fell 1 point shy of where my limit order to take profits was, then started to bounce. No time to be greedy when something like that happens, so I just quickly went to the market to exit. It may not look like much on that chart, but that trade made quite a bit of money.

However, the bigger portion of the last post was on the dollar and it's potential long setup. That was also triggerred and the dollar has moved up somewhat, but not as quickly as I thought it would with the stock drop that occurred. There is some international jaw boning about world reserve currency etc.. Maybe that is why the dollar which appeared to be going gangbusters, has stalled. I have no idea, I do not trade on that kind of nonsense anyway. However, it does appear that we have a major top at hand in many commodity markets, probably for the rest of the year. As a result, I expect the dollar to continue to move up overall.

I heard an intersting comment about all the money the government is printing now and how inflationary it is. The comment basically said it is the velocity of the money that causes inflation, not just the supply of it. If it is being horded, it will not be inflationary. I think in general that is what is happening and why we are still in a deflationary environment that should continue for awhile.

I have also been bullish on bonds and made a nice longside trade there that I just exited today. I am not sure if I ever posted anything on bonds here or not, but traded some emails with some readers of this telling them I was bullish. I continue to be and will be hoping for a pullback to enter on the long side again. Also hoping to sell a rally in stocks if we are lucky enough to get it, this could waterfall here.

Well right on cue, a minor sell signal showed up for stocks, and we got a bounce here in the Dollar. I had stated previously that there was not a sell signal in sight for stocks, then all of the sudden it showed up quickly. Is this a really strong sell signal ? No. However, we are in an area where it is worth taking.

This bounce in the dollar is a good enough bounce, when tied into the larger picture cycles and major support, to signal a buy now here if we move back down as indicated by the line on the chart. All this means is that we need to form a higher short term low now, then we can buy a break out above it.



Will it happen? you never know. If for some reason we get a sharp stock decline this could just shoot right up out of here without a pause, but odds favor somewhat of a retest of the low, which will be our buying spot. If the cycle is ready to kick in again, this market could really move up quickly from here. If these lows do not hold, you can probably kiss the dollar goodbye for awhile. This makes it worth a shot on the long side due to the possible big move that could happen, good risk/reward ratio.