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.