July was a great month in stocks & perhaps August will be better!

Bear Trap!!

August should prove to be the month of the macro turn in the stock market. The market has low interest rates, no inflation and a slow basing U.S. economy. The economy in the global world already based and had been slow for over the year. The stock markets in China bottomed in December of 2008 and the United States bottomed in March of 2009. That is the key, understanding if China indeed does have the lead. Copper, the lead commodity to economic growth, acts brilliantly and is in a solid up trend. Macro forces are well positioned globally. On balance economy activity has continue to increase in the United States.

The market continues to point higher and the new month has begun a bullish period. Next week the ISM manufacturing index comes Monday morning at 10est. It may provide a very nice boost to the market after last Friday's Chicago PMI data. The Jobs report comes next Friday. At this point, the unemployment rate may not be the best indicator of labor strength as workers leaving the job market have artificially deflated the number. Instead, we should concentrate on private payroll growth. Once private payrolls stabilize above 100,000, we should start to see improvement in the labor sector. The look of the market is still under short term pressure and consolidation over the past week.

The market did make new weekly highs for the move higher at 1118.75 last week. The ES futures 200/60 currently sits at 1095.04. The market did an excellent job last week of staying together and working off the overbought situation. Overall, economic news mostly was not as bad as expected while earnings generally topped analysts projections. Europe may be moving beyond the sovereign debt crisis and the Fed was still hopeful about the recovery continuing. With housing coming off special tax credits, the economy is looking soft at the end of the second quarter. Who doesn't know this? 

August sets up to move higher with targets at 1113.00, 1115.75, 1118.75, 1129.50, 1159.50 & 1174.75. These numbers are all well within reach. If the down side shows up targets are 1083.50, 1061.25 and 1050.75. The 1050.00 area has proved to be very large support. The down side is the least likely probability at this time. The IWM or Russell 2000 is up 4.0% year to date and is the strongest group. The airline sector, believe it or not, is the best group of the year. 1129.50 is the key, a close at the end of August above that level and we will have Macro buys!!

The Secular Global Bull Market is alive and well...

The new month (August) sets up macro buy signals in the stock market and it clearly points higher, being led higher by the break out in the copper market! Ben Bernanke's testimony on the "unusually unpredictable" future of the American economy is the perfect "Wall of Worry”. It's my belief that the recent decline in U.S. stocks is a correction within a primary uptrend. I have concluded the recent weakness has been part of a correction within a primary uptrend, rather than the start of an extended
bear market.

This means the environment for stock investing over the next few years is highly favorable in comparison to other investment classes. The economic back drop is slow-to-moderate growth globally, with inflation under control. Maybe the best thing that is going on is all the ‘crazy talk’ that somehow things are different this time. Nothing is ever different in markets. Was it different in 1982, 1987, 1990, 1996, 2000, 2002, 2007 and 2009? Each one of these years the world was ending and things would never been the same.

No one knows what is going to happen tomorrow. Math can potentially lead us to the highest probabilities, and that is my only concern. I don't care about the stories. I care about how markets function and the math behind it. Stories are discounted as soon as they hit the tape.

The biggest edge is knowing that all markets function the same way. As we look at the global back drop, yes a slowing has taken place into normal growth. The break neck pace has slowed in China; yet it's not over by a long shot. If China is going to become the biggest economy in the world, it should happen by 2020 if not sooner. The rest of Asia is acting well, and India has had a small slowing but does continue to grow. Europe is not going to fall into the abyss and the issues there are already contained. All in all, when you look around the world, even the biggest economy is growing, the United States. While a pause to refresh has taken place - that isn't an issue. You grow from a deep negative number in GDP to 3.9% that is almost a 10% GDP swing in a year's time. That isn't something that reverses and goes away in booming global growth.

The stock market is in a wonderful position in the Macro time frame. The low of the year is in and the move higher is being led by the copper market. The secular bull market is well intact and a new leg higher has started.

Just another text book day....

Globex low holds the ATR stop, and work our way to Globex high--Copper has the lead and shorts have little chance...

160. LOSE YOUR OPINION--NOT YOU’RE MONEY.

Below are a couple of tweets I sent from StockTwits. Reality is, the market is carrying huge momentum along with strong oil and weaker dollar. Trying to pick highs or lows is not my style. I will short a clear break, not before. Read rule # 160

RT @krglobal $ES_F anyone else selling into this? I will tomorrow on new high 1085 ish about 18 hours ago via StockTwits Web


RT @krglobal $ES_F Opening 1/3 short now waiting for pop higher to add towards 78-82> 1085 caps this run for now. Range set 1050 - 1100 about 18 hours ago via StockTwits Web

stock market 7/18/10

Very simple, the Globex low (whatever it is) in the AM I am a buyer of. I know around 1050.00 there is a lot of support.

Housing starts at 8:30est -Housing starts in May fell back 10.0 percent to an annualized pace of 0.593 million units, following a 3.9 percent boost in April. The decline in the latest month was led by a 17.2 percent decrease in single-family starts, following a 5.6 percent gain in April. The May drop in this component was the largest since the 19.6 percent plunge in January 1991. Permits declined 5.9 percent to an annualized pace of 0.574 million units, following a 10.9 percent fall in April.

EVERYONE KNOWS THIS NUMBER WILL BE WEAK YOU BUY THE WEAKNESS..

IM A BUYER OF XLF, C, BAC, SSO on weakness premarket and any gap down around tomorrow's opening if I have to wait that long.

Weekly Journal 7-18-2010

The market ran into trouble last Friday and the question is was it option related. As was the plan given to our clients, all longs were covered once we broke below the ES rollover pivot of 1080.50.

Was the action last Friday just a one day wonder? Highly doubtful, the market has the look of trouble started. The fact that the bond market continues to rally has made the stock market's upside come into question. Copper also is struggling and since it has led the market around by the nose since March 2009, that is a warning that we must heed. What you cannot do is hesitate. Looking at the position of the (Daily) MACD's on the S&P 500, again it's going to be very late coming to the directional change. The market will have moved long before a sell signal is generated.

Weekly Percentage

Weekly New New Percentage New New
Name Adv Decl High Low Adv Decl High Low
-------------- ---- ---- ---- ---- ---- ---- ---- ----
Dow Ind 10 20 1 0 33% 67% 3% 0%
S&P 500 133 367 22 3 27% 73% 4% 1%
S&P 100 34 66 3 1 34% 66% 3% 1%
NASDAQ 100 50 50 5 1 50% 50% 5% 1%

Global financial market returns stand at the threshold of mediocrity. With bonds priced not for recession but near depression, most major global bond indices now yield less than 3%. Last Friday, the 2-year T-note yield hit a record low. Note and bond yields have been easing on both favorable inflation numbers and downgrades on the recovery. The 3-month T-bill is still held down by a very low fed funds target range of zero to 0.25 percent. The Fed has continued to state that short-term rates are likely to remain extremely low for an extended period of time.

For July, manufacturing appears to be softening in the mid-Atlantic and New York State areas. The Philadelphia Fed's general business conditions index came in at 5.1 in July indicating a slower rate of growth than June's 8.0 reading. Break even is zero instead of 50 as with the ISM reports. But there is a possibility of decline ahead. New orders fell to minus 4.3 to mark an end to a year long string of growth. Unfilled orders—at minus 8.6—showed significant contraction. Delivery times improved sharply, indicating fewer bottlenecks from softer demand. This is a negative sign for business activity. Employment did show a modest gain at 4.0 vs. June's minus 1.5.

The recovery is still underway but we may be hitting a temporary plateau in the second half. Even though there are signs of softness, growth will still depend heavily on manufacturing and the consumer sector. The good news is that exports and business investment in equipment are starting to carry more weight. On a final note, slower growth is not the same as a double dip. With monetary policy still so loose, another recession is trying to be avoided. The Fractal (see picture) continues to point to higher bond prices and with the economic data shifting for the worse, bonds continue to look stable to higher in price. As bonds go higher in price that continues to pressure stocks lower.

The 10 Commandments of Trading

1. Stops are the key to success for many traders… limit your loses. Before entering a trade focus on how much you can lose not how much you can make. If you protect yourself you will be surprised by how far your profits run.

2. We do not buy gap ups and we do not sell gaps down. Yes there are exceptions to every rule but we are interested in the highest probability.

3. Remember all markets function in the same manner and the one driving factor is that human nature which dictates price movement based on panic, fear, greed, insecurity, anxiety, stress and uncertainty. Think with the opposite side of your brain. Nothing is new in stocks. The game does not change and neither does human nature.

4. Mark to market everyday which is how a professional watches his or her money. Know your capital every single day and understand the amount of money in your account.

5. Do not let the minute-to-minute or day-to-day swings change your conviction of where the market is going. Stick and stay to make it pay.

6. Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss. Sell your losers keep your winners it’s that simple.


7. Be advised that it is better to be more interested in the market’s reaction to new information than to be the piece of news itself. People who buy headlines eventually end up selling newspapers.

8. Keep record of your trading results

9. Take a trading break. A break will give you a detached view of the market and a fresh look at yourself and the way you want to trade for the next several weeks.

10. The deepest secret for the trader is to subordinate his will to the will of the market. The market is truth as it reflects all forces that bear upon it. As long as he recognizes this, he is safe. When he ignores it, he is lost.

Summary & Plan 6/14/2010

The clearing of 1080.25 is a huge positive for Quarter 3, 2010 S&P 500

It s pretty simple you continue to buy weakness. Highly doubtful that the market has any type of significant correction until July 23rd - July 25th.

The Globex numbers below are your targets as we move higher.

Globex Left		Globex Left
1174.75
1159.50		1091.25
1129.50		1073.00
1117.00		1065.50

As you see and have watch us be long when the proprietary Trade Advantage* software went into a daily buy (6 days now); and has generated a weekly buy first week up.

People are in disbelief about the rally when they should have been about the decline. That is the joke of all this; the majority is looking for a double dip recession. We always have a plan each week and this one is right on schedule.

1080.50 very exciting level

1080.50 very exciting level so far nothing unexpected-- honestly thought AA would be fine, it was. Rest of earnings will be fine here big companies are lean and mean!!!

Targets above: 1091; 1097.75; 1117

55. A FATAL MISTAKE MADE BY THE FUNDAMENTAL TRADER IS TO TAKE SMALL PROFITS. THIS IS THE RESULT OF LIMITED VISION. ---EXTREMES ALWAYS SEEM SILLY TO MEN OF SO CALLED GOOD JUDGMENT..

The Economy is doing very well and should continue at 3% GDP rest of 2010

The Economy is doing very well and should continue at 3% GDP rest of 2010

Some of the best rallies come when everyone is scratching his or her head and can't figure out why it's happening. Last Wednesday on CNBC, a lot of analysts were telling us that this is just a flash in the pan. I didn't hear anyone say that it was time to get on board. I think the markets are in a terrific position.
How can things be getting worse when Canada just pick up 93,000 new jobs some 60,000 higher than the estimate.

As most investors know, investor sentiment is a 'contrary' indicator. That is, sentiment is at a high level of optimism and bullishness at market tops, and high levels of fear and bearishness at market lows. That is only natural. When a market correction is underway, investors naturally become increasingly pessimistic and bearish as their losses mount, so that by the time corrections end investor sentiment is usually at an extreme of bearishness.

While some methods of measuring sentiment, such as the Investors Intelligence Sentiment Index, and the VIX Index (also known as the Fear Index), are not at the high level of fear or bearishness they usually reach at market lows, the poll of its members by the American Association of Individual Investors (AAII) did spike up to a level of bearishness this week that is often associated with market lows. We consider that level to be when the poll reaches 55% bearish, and bullishness drops below 21. The poll's bullishness had been holding up surprisingly well until recently. While showing less confidence and bullishness as the market correction that began in April became more serious, three weeks ago the poll showed 34% were still bullish, and only 32% were bearish (the rest neutral). However, over the last two weeks of further market decline, bearishness increased to 42% last week, and spiked up to 57% this week, while bullishness fell to 24.7% last week, and only 20.9% this week. Those are in the range supportive of the market being at a low, not necessarily the low, but a low.

The June ISM non-manufacturing index, the employment component dropped only marginally and is consistent with respectable payroll growth. And the employment trend index was up for the 11th straight month in a row and it always leads payroll growth.

Jobless claims show solid improvement. Initial claims fell 21,000 in the July 3 week to 454,000 for the lowest level since early May. (prior week revised 3,000 higher to 475,000). The four-week average fell 1,250 to 466,000, the best weekly improvement since early May though the level is still slightly higher than a month ago. Declines are also seen for continuing claims, down 224,000 in the June 26 week to 4.413 million for the lowest level since November. Declines here reflect a mix of new hiring but also the expiration of benefits as the unemployed move out of the insured pool. The unemployment rate for insured workers fell 2 tenths to 3.4 percent. Thing are slowly getting better.

STRATEGY REPORT

Summary & Plan for 7/7/2010--1038.50 S&P futures clear that level everything turns Bullish!!

There is a massive bullish divergence in the SPX cash to the summation index. That is an excellent sign that the market is going to trade higher. Looks like the XLE or oil patch is about to
take the lead in the market. (You buy weakness!)

The market is clearly over sold on many measures & above 1038.50 it is green lights for all time frames. Sentiment is now in a very good position with market vane at 39% bulls & AAII numbers at 25% bulls and 42% bears. The put call numbers are now 1.04 on CBOE 10 day moving average. The ISE numbers are very good with the 10dma at 100 and the Equity ratio is .69 which is getting close to bullish at .70. I really like this set up and with copper doing well the likelihood of a double dip recession is going out the window.

Gold is a sell in the Macro time frame and I consider it very bullish for the stock market.

Friday's selloff at the close......

I have a list of rules that were given to me many years ago by my mentor and periodically i take the time to read through them. The negative activity at the close, although predictable, brought to mind one very important rule...

45. YOU CANNOT PERFORM VERY WELL FOR VERY LONG WITH YOUR SHOES NAILED TO THE FLOOR. IN TRADING AS IN FENCING THERE ARE THE QUICK AND THE DEAD.

Japanes Yen...worth a shot??

As you can see by the chart, since the volume rollover to September (which occurred on June 11th), the Yen has been up 12 of last 15 days. Smarter to wait for a confirmed sell signal but for those who like to gamble..........

Patience.....

You can see now we have made lower low hourly. That sets up the rest of the day with 1010.25 the high of low hour. we are now 1 hour after ism data. The economy has slowed just a bit that is so normal. After 12est we should have legs under us. You must asked yourself why is gold falling apart. Keep your head together this isn't the end of the world.

Bonds are not blowing out to the up side either. The 56 ism number is not a bad number. Housing sales are weak but it's a slow work out. Mortgage rates are the best ever. Inflation is not the threat here.

I love the lower low in hourly chart now a bit deeper than I thought but I have no issue here.