Monday, August 30, 2010

The Three Musketeers: USD/JPY, VIX, & SPX

USD/JPY 6 month Daily Chart

-I expect to see a retest of 83.75 levels, possibly as low as 83.25
-The BOJ cannot solely rely on tough talk to weaken the Yen, they must show & prove intervention to the market
-Momentum and Volatility remain flat; no reason to get long or short until a catalyst appears
-The 20 day SMA will serve as short-term resistance; 85.75-86.25
-RSI resistance at 55 levels remains firm
-Don't discount strong economic data; Unemployment sits at 5.3% and a Current Account Surplus is 3.3% of GDP.

Trade: I will get long once I see a retest of 83.75 lows. The BOJ will intervene through Quantitative Easing policies in order to allow the exchange rate to bounce to the upside. Once long, I'm looking for 800-1000 pips to the upside.


VIX 6 month Daily

-200 Day SMA has held as a floor since the 'Flash Crash'
-The 20 day SMA is about to cross the 50 day
-RSI is poised to break through 60 and test 70 overbought levels last seen in May
-Momentum has plenty of room up to 2.5
-As long as money continues to flow out of Equities into Bonds, volatility will persist


SPX 6 month Daily

-A head and shoulders reversal pattern is well underway
-RSI failed at 50 and will go low until it tests oversold territory at 30
-Momentum topped out and has plenty of room to the downside
-The 20 day SMA will converge with the 50 day SMA in the next couple of trading sessions
-The above chart supplements the VIX story
-This week Consumer Sentiment, China PMI, Euro Zone PMI, U.S. ISM, and NFP take the market sentiment spotlight

Trade: Short SPX till 1000. Look for short-covering/a relief rally before entry. ES Mini Futures are a great place to start. Also, the ProShares UltraShort S&P500 ETF SDS is another way to double down on your bets.


Related ETFs: ProShares UltraShort S&P500 (SDS), CurrencyShares Japanese Yen Trust (FXY), iShares MSCI Japan Index (EWJ), Consumer Discret Select Sector SPDR (XLY)

Patrick M. Ambrus
Analyze Capital LLC
Twitter: AnalyzeCapital

Friday, August 27, 2010

DJIA Update- Charting for Success

Dow Jones Industrial Average Technical Analysis

Daily Chart-6 months

-Momentum still has plenty of room to fall as it just passed break-even territory
-Resistance appears to be forming at the 50-day SMA or 10,300 level
-We could see potential support slightly above 9900-9950
-If this level breaks, Dow could fall to 9300-9500 range, though next clear level of support on the daily chart is 9800
-Expect to see a retest of 50 on the RSI to confirm a downtrend if the re-test fails
-The most recent sell-off lacked aptly confirming volume
-Possibly a head and shoulders reversal pattern

Weekly Chart- 2 Years


-Support may come at levels of 9,600-9,700
-200 day SMA acts as near-term resistance, this equates to a price level of 11,000
-The last rally to 11,000+ was confirmed by robust volume
-Momentum still has room to move to the downside, though it looks to be flattening out
-The 50 day SMA is poised to cross the 200-day SMA, ‘The Golden Cross’, which indicates a strong bullish signal
-35-37 will need to be broken on the RSI for this down-trend to continue


The Daily and Weekly charts both tell equally convincing stories. The Daily chart indicates very bearish sentiment while the Weekly indicates a potential rally is on the way. Thus, in-lieu of the toss-up, I will look to volume over the next few trading days to indicate which way the tape might be headed. At this time, the Dow is up 151.90 points to 10,137.70. A short-covering rally may be underway, or the bulls may be winning the battle today. Regardless, many bears exist in the market, it is only a matter of time before market participants show their true costumes.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: AnalyzeCapital

Thursday, August 26, 2010

Nat Gas Inventories/Trade

Working gas in storage was 3,052 Bcf as of Friday, August 20, 2010, according to EIA estimates. This represents a net increase of 40 Bcf from the previous week. Stocks were 198 Bcf less than last year at this time and 177 Bcf above the 5-year average of 2,875 Bcf. In the East Region, stocks were 15 Bcf above the 5-year average following net injections of 48 Bcf. Stocks in the Producing Region were 84 Bcf above the 5-year average of 865 Bcf after a net withdrawal of 5 Bcf. Stocks in the West Region were 78 Bcf above the 5-year average after a net drawdown of 3 Bcf. At 3,052 Bcf, total working gas is within the 5-year historical range.

This morning I entered a long position in some QG futures. I believe we will see prices move up to 4.00-4.10 before the next pullback. The RSI on the the NG futures remains in oversold territory, and momentum is bottoming. In addition, The UNG confirms a similar trading trend in the RSI and MACD. Also, I expect the 20 day SMA to cross the 50 day. Prices are already bouncing back from the inventory data release.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

Wednesday, August 25, 2010

Market Brief: Aug 25, 2010





1 -2 weeks out:

Short EUR/USD short USD/JPY

Longer Term 3-4 weeks + :

Look for entry to long the EUR/USD and long the USD/JPY.

If crude is more related to European markets long crude with long EUR/USD

As risk aversion deteriorates around the world + continued weak US econ data, we will get continued relative flight to quality sentimentally (weather or not fundamentals support such a move). Though lessened risk aversion will be mild at best if we continue to see strong price pressure in stable european and asian bonds.

Overall Id say risk aversion will stay strong but will lessen in the short term. Though, US equities are going to continue to trend down which can quite possibly drive risk aversion back up if world indices follow the SPX.

All in all such a scenario would support a break in gold's recent resistance of 1256+ to higher highs.

Crude Oil Inventories & Commentary

Oil is falling sharply in reaction to large builds in weekly inventory data. Oil stocks rose 4.1 million barrels with gasoline stocks up 2.3 million and distillates up 1.8 million. The data are for the August 20 week.

Gasoline demand slowed to a 3.0 percent year-on-year pace vs. 3.5 percent and 3.3 percent in the prior weeks. Distillate demand has been slowing abruptly for nearly two months, now at plus 4.9 percent year-on-year. Supply has been heavy the past year but signs of trouble on the demand side may now begin to shift the picture for oil which has been narrowly rangebound all summer.

Has Crude finally found a bottom to this downtrend? It is hard to say. To quote Alex, " 50/50 chance crude ticks up." I do concur. Supply levels of NYMEX WTI are out of control. However, as long as emerging markets demand remains robust, crude should not fall below $65/b. I need to see price movement above the $75-76 line before I turn bullish once again. For now the tape is range bound. Until supply witless down and the EUR/USD pops, I expect crude to trade between $70.50 -$74.

In case anyone was wondering, I was stopped out of My USO calls. Extremely poor trade on my behalf. At least I learned a valuable lesson. Don't buy calls without protection. I will be trading futures for the foreseeable future.

Related ETFs: PowerShares DB Crude Oil Dble Long ETN (DXO), UltraShort Oil & Gas ProShares (DUG), iPath S&P GSCI Crude Oil Ttl Ret Idx ETN (OIL)

Sports: Team USA smacked Greece 87-59. Eric Gordon led the way with 18 points, 4-7 from the promise land.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

Energy Info Aug 25, 2010


Energy Consumption
Via: Travel Insurance


Alexander Lê
Managing Partner
Analyze Capital LLC

Tuesday, August 24, 2010

勝利 x 2

'I'm on a losing strike, I mean winning streak'

-Wasalu Muhammad Jaco

Today I made one of my best trades of this scorching summer. After a glut of discussion on M & A activity, economic data, trade flows, credit flows, and Technical analysis, the lords of trading spoke to me. I was fortunate in my timing because many times a bad entry point can ruin your trade.


The bond markets continue to rally as yields on 10 year government notes tighten to levels reminiscent of the Credit Crisis. Similarly, the USD has not been kind to commodities or U.S. equity markets. Lastly, poor expectations for Existing home sales data and GDP revision data sealed bearish sentiment.

Please view Alex's SPX update below for more in-depth technical analysis.

Related ETFs: CurrencyShares Euro Trust (NYSEArca:FXE), CurrencyShares Japanese Yen Trust (NYSEArca: FXY), ProShares Ultra S&P500 (NYSEArca: SSO)

Literature: Friedrish Engels, The Origins of the Family, Private Property and the State

Sports: The New York Jets and All-Pro center Nick Mangold have agreed on a new seven-year deal worth a maximum of $55 million.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: AnalyzeCapital

Monday, August 23, 2010

SPX UPDATE: August 23, 2010

I apologize for the lack of post on my side. Lots of research and analysis has been takin in-house as our portfolio will be up in running shortly. Though Here are some thoughts:


We should see:

On the high side this week up to 1190


On the downside this week targeting 1055...

for my bearish stance to be confirmed.


Alexander Lê
Managing Parnter
Analyze Capital LLC

Thursday, August 19, 2010

Jobless Claims, Philadelphia FED Survey, & ES Trade

Jobless Claims
Initial claims are piling up, indicating that businesses are continuing to cut costs. Initial claims came in at 500,000 in the August 14 week for the largest total since November. The four-week average of 482,500 is the largest since December. A month-to-month look shows significant deterioration of 25,000 for a percentage change of nearly six percent. The Labor Department said special factors are playing no part in the data

Philly FED Survey
Manufacturing indications out of the Mid-Atlantic region are decidedly negative for August. The Philadelphia Fed's general business conditions index fell to minus 7.7 to indicate month-to-month contraction in business activity. New orders, at minus 7.1, show a second straight monthly decline in what is a definitive indication of weakness. Unfilled orders extended a run of declines. Shipments also fell in the month as did employment and the workweek. Inventories also fell while delivery times quickened

My ES SPX short finally paid off today. The futures activity was timid before the open. However, the Philly Fed survey sealed the deal for me. Currently, I'm surveying the ES chart for reentry points to short again. In addition, I hold some USO options. I'll keep you posted on that when I make up my mind. Until then, I'll enjoy this one.

Related ETFs: ProShares Ultra S&P500 (SSO:US), iShares Russell 2000 Value Index Fund (IWN:US), ProShares UltraShort S&P500 (SDS:US)

Sports: Carmelo Anthony wants to play in New York as a Knick.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: AnalyzeCapital

Wednesday, August 18, 2010

Gauging Market Sentiment

The current equity market is a lethargic trade. The more I look into potential trades the more I find a lack of opportunity. Since The May 9, 2010 ‘Flash Crash’ markets adopted an elusive modus operandi. The European Sovereign Debt crisis waned in and out of news, a bubble in Gold prices tempted us, and economists argued the nuances of stimulus vs. austerity. I miss the ubiquitous uncertainty.

Over the last 10 days volume in the SPY SPDR ETF averaged almost 190 million shares per day. In contrast, over a 3-month span, the SPY averaged close to 252 million shares changing hands daily. Thus, volume decreased by 24.6%. In addition, The GLD SPDR Gold Trust averaged only 10.3 million shares traded in the most recent 10 days. Meanwhile, GLD volume averaged 14.2 million shares per day in the most recent 3 months. Hence, volume declined by 27.5%.

The SPY is the largest ETF by AUM with 66.8 Billion under management. StreetTracks Gold is the second largest with 51.2 Billion under control. What has cooled trading in the aforementioned derivative-like securities? For one, volume has decreased throughout equity markets for the better part of August. Though, with all the technological advances in High Frequency Trading, iPhone/BlackBerry trading apps, and trading robots, we live in an age were trading routinely flashes 24/7-365. Vacation time alone cannot explain the illustrious drop in volume.

Let’s skin this cat another way. What market has seen a consistent uptick in volume without decline? The bond market has. The iShares Investment Grade Corporate Bonds ETF, LQD, volume rallied 13.53% over the past 10 days in comparison to the prior 3 months. Additionally, the iShares TIPS Bond ETF, TIP, saw volume increase by 5.23% over the past 10 days in comparison to average 3-month volume. Now don’t let me get carried away with these statistical redundancies. Empirical reason suggests a normalcy in the gradual volume changes. Spreads continue to tighten as interest rates remain at near zero levels and inflation subsides. Yet, I’m not convinced investment grade debt is the correct safe haven.

Aside from bond prices and yield curves, what catalysts chauffeur equity prices? U.S. economic data often sits behind the wheel. Central Bankers remain the biggest elephants in the room, in particular the FED. The FOMC has found a way to implement a new Quantitative Easing program without calling it QE. The Fed will take proceeds from its MBS securities and buy U.S. Treasury Notes. Hence, U.S. notes continue to yield near-all-time-low interest rates. One thing the FED is clear on, the committee fears deflation. Thus, the committee led by Helicopter Ben will continue to shower the economy with liquidity. Until the day of reckoning comes, expect investment grade debt to rally. I also expect corporate debt issuance to exacerbate demand.

Remarkably, I managed to construct a top down argument that bottoms up. The FED’s decision making on monetary policy and QE will affect the bond market, which will drive equity prices. I surmise, global debt markets coalesced to form a bubble. Now that we know a bubble exists, we need to know how large it will grow and when it will pop. Although calling a top or bottom is dangerous, pointing out a bubble is reasonable and needs recognition. Undoubtedly, equities will benefit tremendously from the unwinding of the crowded debt trade. My suggestion is to short overbought bond ETFs and long growth/value equity ETFs. This may be a defensive play, but it will work in time.

Bond ETFs: iShares TIPS Bond Fund (TIP), , iBoxx $ Investment Grade Corporate Bond Fund (LQD), Vanguard Total Bond Market ETF (BND)

Equity ETFs: Russell 1000 Growth Index Fund(IWF), Vanguard Total Stock Market ETF (VTI), ELEMENTS Benjamin Graham Large Cap Value ETN

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

Monday, August 16, 2010

Japan GDP Growth

The Gross Domestic Product (GDP) in Japan expanded at an annual rate of 5.00 percent in the last quarter. Japan Gross Domestic Product is worth 5068 billion dollars or 8.17% of the world economy, according to the World Bank. Japan's industrialized, free market economy is the second-largest in the world. Its economy is highly efficient and competitive in areas linked to international trade, but productivity is far lower in protected areas such as agriculture, distribution, and services. Japan's reservoir of industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade produced a mature industrial economy. Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy. This page includes: Japan GDP Growth Rate chart, historical data and news.

Export oriented growth remains resilient. However, The world's second largest economy faces a grave test of fiscal fat camp. The island's budget deficit as a percent of GDP staggers at -7.5%. Also, political reform/turnover transcends any progress made from previous fiscal reform.

Alas not all hope is lost. Deflation fears begin to subside while unemployment holds around 5%. Additionally, Industrial production surged 17.0% from June 2009. Now, Japan's leadership needs to make lemonade. Naoto Kan a former finance minister and current PM, may be the correct leader to tame the ravenous debt beast as well as exploit the island's strengths.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

Tuesday, August 10, 2010

FOMC Decision

Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature

Thomas M. Hoening was again the lone FOMC dissenter. Since Helicopter Ben uttered the phrase 'nascent recovery' on Capital Hill, cryptic language has proceeded. Clarity from the FED going into the 4th quarter is unquestionably salient. Perhaps, we (market participants) should sit tight until Jackson Hole concludes. Surely, transparency will become abundantly apparent after the curtains close at the Committee's annual Wyoming refuge.

Uncertainty is apparent in risk/reward security markets. At this point in time, The FED maintains relevance and reverence on the Streets plastered with Investment Banks rather than cafe's and bakeries. Ergo, Monetary Policy must remain stable as U.S. fiscal policy shifts political party lines. The Bush tax cuts abide while politicians play musical chairs.

Something tells me Precious and Industrial metals may be the best play in the 4th quarter as risk aversion reigns supreme. Unless of coarse one likes Government Debt.

Related ETF's: iShares Barclays 10-20 Year Treasury Bond Fund (TLH:US), GS Connect S&P GSCI Enhanced Commodity Total Return Strategy Index ETN (GSC:US), ETFS Palladium Trust (PALL:US), E-TRACS UBS Long Platinum ETN (PTM:US)

Literature: Karl R. Popper's The Open Society and Its Enemies 2 Hegel and Marx

Sports: T-Mac finally gets another shot. Former Superstar Tracey McGrady officially Signed with the Detroit Pistons today. Detroit's backcourt is crowded.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital


Wow talk about great timing. I exited my trade 59 pips down. I could have taken profits at 70 pips (lower tail shadow below 2nd deviation BB), but I wanted keep some discipline. I instead waited for prices reverse and re-correct to my exit point. The Fed announcement almost caught me with my pants down as I was concentrating on admin issues. Luckily I had a few entry orders 2-3 ATR above my exit to take advantage of a of a short term up swing and down swing.


I had half a standard lot around 1 ATR above to take advantage of the up and then 1 standard lot 2-3 ATR above my last exit to take advantage of the pull back from the potential big upswing I was expecting from the announcement.

Luckily, the strategy played out somewhat OK giving an additional 6 pips to close out the day.

I guess you can say that I was trading the "pricing in" of the FOMC announcement from last night and had a trade in place to take advantage of the post announcement as well.


Alexander Lệ
Managing Partner LLC
Analyze Capital LLC

EUR Update: April 28, 2010

PRE FOMC Announcement:

Last night I setup some entry orders and went to bed. My timing of and use of volatility entries in combination of BB analysis worked quite well. Indeed the analysis it confirmed this short term down trend. However, I do question the validity of this down trend as it may become a higher low in the mid to longer term (month to month).

Here is my trade:

Entry was set 1 ATR away from current price. Last night, current price traded and closed out side the 2nd deviation lower BB. 1 ATR coincided with 1st deviation BB resistance. One of my orders was filled and killed, while I managed to get half a standard lot in for the go.

I woke up and I am now currently managing the trade. When waking up I wanted to jump ship on half the gains I currently have... luckily I didn't second guess myself and stuck to the trade. Last night I also had to stop myself from second guessing myself on entering at current price. Instead I stuck to my orginal thesis and I was correct to not enter earlier.

At the moment, I decided its best to maximize the 8 hour time frame indicators within the context of a bearish daily chart short term trend (trade to lower momentum levels)

Lastly for exit I am targeting right about 8 hour short term trend support (timed with 38~ RSI).


What did I learn? Keep your cool, maintain discipline. Currently I'm also updating risk management I tightened stops as I don't expect significant upward volatility to knock me out.

I'm definitely getting comfortable with modest leverage. However, with all these ridiculous financial reforms, I may have to flee America if I want to continue on the retail side. Either that or switch to pure mini futures.

**side note** as im writing markets in Europe are starting to close hence the lessened volatility, hopefully this trend continues through the US close.


Alexander Lệ
Managing Partner LLC
Analyze Capital LLC

Sunday, August 8, 2010

How to be unemployed

How to Become Unemployed in 7 Easy Steps from Robert Pagliarini on Vimeo.

Think about it . . . its common sense yet lots of people don't realize it.


Alexander Lệ
Managing Partner LLC
Analyze Capital LLC

Friday, August 6, 2010

Unemployment Situation & Coffee Update

Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment edged up by 71,000.

Bureau of Labor Statistics

Mediocre Jobs report. I was looking for Private sector jobs to hit the 80,000 mark. Private sector growth is the only viable solution to the unemployment epidemic.

SPX Futures are in the red. European Equities lightly rally. Crude Oil off 0.60 to $81.41/barrel. December Gold COntracts touched $1200/Troy Oz. EUR/USD back up over 1.32. The pair rallied about 70 Pips on the unemployment announcement. WHeat prices continue to climb, with September contracts up $13.25 to 799/bushel.

Related ETFs: ELEMENTS Linked to the S&P Commodity Trends Indicator - Total Return (LSC:US), iPath Dow Jones-UBS Grains Subindex Total Return ETN (JJG:US), ELEMENTS Linked to the Rogers International Commodity Index - Agri Tot Return (RJA:US)

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

Wednesday, August 4, 2010

EIA Oil Inventories & SPX Trade

EIA Data
U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ending July 30, 113 thousand barrels per day above the previous week’s average. Refineries operated at 91.2 percent of their operable capacity last week. Gasoline production decreased last week, averaging 9.4 million barrels per day. Distillate fuel production increased slightly last week, averaging 4.4 million barrels per day.

U.S. crude oil imports averaged 9.6 million barrels per day last week, down by 1.5 million barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 10.0 million barrels per day, 494 thousand barrels per day above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.2 million barrels per day. Distillate fuel imports averaged 187 thousand barrels per day last week.

Energy Information Agency

SPX Trade
Yesterday I entered a short position on some SPX E-mini futures. Today I was stopped at around 1125. This was a poor trade overall. I mistimed my entry point. From here my trade unravelled. However, I maintained discipline and did not get emotional. Sometimes you learn more about trading from losers than winners. Although, I did have that 30 point gainer last week, so I should not be too disappointed. Overall, I need to re-evaluate my thoughts on the SPX going forward (short-term movements). The lack of volatility in this market cramps my trading style.

Related ETFs:ProShares UltraShort S&P500 (SDS:US), Consumer Discretionary Select Sector SPDR Fund (XLY:US), Oil Services Holders Trust (OIH:US)

Books: Ken Rogoff and Carmen Reinhart's This Time is DIfferent gives great insight into the relationships of banking crises, sovereign defaults, inflation, unemployment, stock market crashes, and currency crises.

Sports: The Diesel to Bean Town. Good move for both parties.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: AnalyzeCapital

Tuesday, August 3, 2010

EUR Update: AUG 03, 2010

Hourly charts have been screaming at me keep buying the EUR! And I have been right so far… (caught the leg up from 1.29 to one 1.30 and 1.30 to 1.31). However, the daily chart is telling me that 1.32+ is looking ripe for a correction. Someone asked me why 1.32? Why is that significant? Well if you are considering week to week movements surely it doesn't matter. But If I enter long on day to day movements, there is the strong risk Ill sucking my thumb and waiting the EUR corrects (to the downside) regain profits on a bad entry.

Sentimentally plus the recent strong moves to the upside say I should enter now, but my setup says to hold off at least until the next few days. Even if prices do move up to 1.33 theres plenty of room to 1.35 and I think a correction is needed to sustain this rally.

Corrections needed in

  • RSI
  • MACD

    In addition to a possible waning ADX, doesn't make for a good entry signals.


    Alexander Lê
    Managing Partner
    Analyze Capital LLC
  • SPX Update: August 03, 2010

    **Skip to bottom for summary**

    What we have here is the SPDR components graphed individually. Take the weighted average and apply the SPX methodology and you get your S&P500.

    You can see the price pattern is the same of the SPX except one can see where there is a consolidated trend (AUG 09 to FEB 2010) and we can see which sectors are accounting for the huge spike seen from FEB 2010 to MAY 2010.

    I will now argue that from AUG 2009 to JAN 20, 2010 that the trend was a true strong uptrend as all sectors were tightly correlated with strong earnings across the board. At JAN 20, 2010 the correlations broke down as equities tanked to FEB 8, 2010. From here we see a split in three groups of the SPX. Industrials(XLI) and Consumer Discretionary (XLY) sky rocket while Utilities stagnates (XLU). Every other sector trades between XLI/XLY and XLU.

    To me such a break down in correlation only shows that the rally to the 1200 ranges in late APRIL were not justifiable as the rest of the sectors lagged the two big leaders (XLI and XLY). By MAY we see a reversion to fundamentals and correlations as Equities correct from the false FEB to May rally. Since MAY we again see a tight correlation amongst all the sectors except that XLI and XLY are still trading significantly above their fellow components (a large spread between XLI/XLY and the other sectors).

    As this current drop has failed to produces a strong re-convergence I would say any strong bullish moves are still not justifiable until all sectors re-converge with a high correlation (a.k.a tighter spreads with a high correlation).

    XLI and XLY may be in for a good short if I am correct with SPX 1150 serving as good resistance. If the pullback is strong enough to re-coverge all sectors with a strong correlation I will be bullish on the SPX for the rest of the year.


    I am bear short term on the SPX (Bear for AUG). Short term sentiment may force prices to 1150 where I will expect resistance, established back from JAN 2010, to hold. If prices do fail strongly, it would complete a bearish head and shoulder patterns giving evidence for a short to the 1000's level (JAN 10 left shoulder, end APRIL Head, AUG/SEPT 2010 Right shoulder?)...


    Ride the SPX up to 1050: Todays price action was just a breather from the gap up from two days ago, the next few days price should continue lower levels making a good entry to ride up to my supposed 1150 resistance.

    Short at 1150 if conditions are right (multiple confirmation)

    Ride the short to low 1000's


    The risk is that the SPX doesn't care that important sectors like Utilities have been stagnant for a year and other sectors are lagging consumer discretionary and Industrials. If that is the case sentiment should be able to shoot the SPX straight to 1200 instead. At these levels I would short instead since I doubt sector spreads would have tightend making such a move not justifiable (see analysis above).


    Alexander Lê
    Managing Partner
    Analyze Capital LLC

    Pending Home Sales and Quick & Dirty Market Update

    Pending home sales index fell 2.6 percent in June to 75.7. Year-on-year the index is down 18.6 percent. Sales were down in three of regions. The National Association of Realtors is warning that near-term sales of existing homes are likely to be "notably lower" in contrast to the spring surge which was fed by government stimulus.

    Oil, Gold, and Silver continue to move higher today. Will Oil reach $85/b this week? It is hard to say. Tomorrow's EIA numbers ought to be interesting. Maybe Demand will pick up in correlation with weak supply figures.

    Global Equities tanked today highlighted by the CSI's drop of more than 50 points or 1.76%. The SPX is almost even on the day after a vigorous morning sell-off. Will we test 1130 today?

    Global Debt markets continue to rally today. Even apetite for Greek 10 year notes picked up. U.S. 10 years are up over 45 bp and yield 2.91%.

    Did I mention we have a weak dollar as well? I forgot, you already knew that. EUR/USD = 1.3235 as I type.

    Related ETFs: iShares Silver Trust (SLV:US), iShares Dow Jones US Real Estate Index Fund (IYR:US), ProShares UltraShort 20+ Year Treasury (TBT:US)

    Sports: You know its August when Brett Favre retires again. Let the drama ensue.

    Patrick M. Ambrus
    Analyze Capital LLC
    Twitter: AnalyzeCapital

    Monday, August 2, 2010

    ISM Manufacturing, China PMI, & an SPX Trade

    ISM Data
    New orders slowed abruptly in July, in what is the key headline of the Institute For Supply Management report. New orders fell to 53.5, still above 50 to indicate month-to-month growth but down five points from June to indicate a significantly slower rate of growth. The 53.5 reading is the lowest since the manufacturing sector emerged from recession this time last year. Backlog orders also slowed, to 54.5 for a 2-1/2 point decline and its lowest reading since December.

    China PMI
    A purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics slid to 49.4 from 50.4 in June. A separate, government-backed PMI fell to 51.2 from 52.1, the Federation of Logistics and Purchasing reported yesterday. Fifty is the dividing line between expansion and contraction.

    Around 09:30 EST I decided to go long some SPX E-mini Futures. The inspiration came last night. Before bed I performed various Synthesis and Analysis of China PMI data coupled with quotes from the Global debt market before bedtime. Sentiment pointed toward a rally in equities. In addition, The German Xetra Dax was up over 2% before U.S. equity trading opened. Confirmation, or so I surmised. Hence, I made a quick play and will wait for more catalysts to reveal themselves.

    Related ETFs: iShares FTSE/Xinhua China 25 Index Fund (FXI:US), Materials Select Sector SPDR Fund (XLB:US), iShares Dow Jones Transportation Average Index Fund (IYT:US)

    Music Selection: I saw Nas & Damian Marley perform in Brooklyn on Saturday. Positive music with a powerful message. My favorite track is leaders.

    Sports: Unfortunately, NY Jets Defender Darrelle Revis wants more money. I can't blame the guy. He is the best Cornerback in the game and the backbone of our defense. We need him back.

    Patrick M. Ambrus
    Analyze Capital LLC
    Twitter: Analyze Capital
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