SPX Update: 3.30.10

As you can see from my last post March 24, the SPX is slighty up. Though from last week into this week prices has arguably traded sideways with no big significant up or down days. Volume is also very average to light confirming this sideways trading.

I am still maintaining my bearish view into next week. Prices are too high at these level to substantially sustain levels in the 1200. IF prices do reach 1200 before a 5%+ retracement, I would consider strongly shorting at perceived resistance levels.

I have 7 more days for my thesis to play out, afterwards I will assess my performance. As of late timing has been an issue for my short-term performance, which is typically why I tend to trade longer term trends. Overall, my mid and longer term views also still hold. (see my march 24 post --> CLICK HERE MARCH 24th POST>)

SPX Technical Update: March 24, 2010

** Skip to bottom for Summary and Conclusions


So I was completely wrong on my last call for the short term. I was bearish from two weeks ago.

LAST SPX UPDATE/FORECAST <---

Looking back I can pick out a few flaws from my last analysis. I should have given more weight on the weekly time frame.



I should have realized that on the daily chart the RSI could remain extended for a weekly time frame which actually occurred, there was evidence of this on the weekly chart, with prices showing plenty of upward movement to 1220+ (via 200 sma resistance considerable above current price levels). Though I am bullish to 1220+, I would prefer to see a healthy 5% correct to levels of 1120 from current highs to be certain of a continued bull trend to 1220+ or beyond.





I based my last short term bearish thesis on the daily chart, as you see that 1150 resistance level was blown right out of the water as the RSI remained extended. It is only now, that MACD may be seeing a momentum reversal. To those following, always keep in mind of the lagged nature of these slow moving indicators. To be a bit more precise perhaps I may try to start experimenting with exponential indicators.


Looking back to the weekly chart, we definitely are seeing strong bearish development around the 1220 level. 200 SMA resistance coincides with a 70 RSI topping out. The MACD alludes to a very interesting question for the current trend. If prices do top out at 1220, will we see another 10% drop? which barely budged the MACD or will this be a full out reversal where the MACD will work out its pent up downward momentum over the course of a few months returning to center-line balance 0. If this is the case, a true test of the uptrend will be when prices test 1030 support.

Other bearish confirmation seen is in the consolidation of mild volume, I'm sure BB analysis will point to price consideration which will confirm strong bull trend or a reversal to the downside (either or).

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Time Frames:

I will be bullish after a decent 5% correction in the second quarter (perhaps bearish for rest of march - making march half bull then half bear). I will be bullish to levels of 1220+, which I believe can be achieved within the first two months of the second quarter.

Once 1220 resistance holds we should see at least a month of price pull backs 5-10%+ (during the last month of the second quarter). "IF" I am completely wrong about this resistance level like last time (this time I doubt it though). Hell, I'll be darn sure to see 1300+ levels, which sounds insane already...


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Summary

All in all, I will wait for that correction in the SPX, and be bullish to 1220+ which I think will be achieved within the first two months of second quarter. Though currently to get there I think a 5% correction to 1120 is needed for current uptrend to remain healthy (possibly a good entry point if one is bullish to higher than 1220+). So for next two weeks ill be looking for a continued pullback. I will keep posted on this.

Though with past movements and relative strength vs world equity markets, a lighter pull back is feasible as US seems to be "it" place to be. Though, I'm a bit of a skeptic about the legitimacy of such ideas, considering the weakness of our labor markets still. But compared to what Europe is going through I guess the US does greener on the other side for sure.

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Conclusions

I have to change my time frames and target levels considering how bullish the SPX has been.

This is what I said last time:

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"Apologies for confusing rhetoric:

1-2 weeks out: Bearish
4 weeks and longer: Bullish

In other words bearish for most of March but by mid to end of second quarter I will be bullish on SPX to the 1200 levels. "


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Since the bull's have moved faster than my expectations, I'm now bearish for the time that I said I would be bullish from my last post. And certainly seeing 1200+ levels is more feasible sooner than later.

1. bearish two weeks out (rest of march)
2. Beyond that as long as a lower high is made I will be bullish 2 months into the second quarter.

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The key confirmation of a health 1200 level will be since with a decent correction that creates a higher low

**


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Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Existing Home Sales- 3.23.2010

Via Bloomberg:

Demand for existing homes remained extremely weak in February with sales at a 5.02 million annual rate for a 0.6 percent decline from January. The seasonal build in supply, at 8.6 months vs. 7.8 in January and 7.2 in December, is the steepest in the last 20 years. The build has been holding down prices which are at a median $165,100, up 0.1 percent from February, and at an average $210,500, down 0.8 percent on the month.

The single-family component, which makes up the vast bulk of sales, fell 1.4 percent in the month to a 4.37 million rate. Distressed sales made up 35 percent of total sales vs. 38 percent in January. All-cash sales, reflecting tight credit and low prices, are extraordinarily high at 27 percent. Regional data show special month-on-month and year-on-year weakness in the still-troubled West followed by weakness in the South which is by far the largest region. The Midwest and Northeast, in perhaps the best news in the report, showed strength in February.

The National Association of Realtors, which compiles the report, still expects to see a surge in sales surrounding the second-round expiration of tax credits this spring. But the housing market is in limbo right now, depending on stimulus effects which even if they do appear point to new trouble at mid-year, especially if mortgage rates begin to rise. New home sales will be posted tomorrow.


Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
AnalyzeCapital@gmail.com

Consumer Price Index A.K.A. Inflation

Temporarily soft energy costs pulled down the headline CPI for February while weak shelter costs kept core inflation very sluggish. Overall CPI inflation for February eased to no change from 0.2 percent the month before. The latest came in just below the market forecast for a 0.1 percent uptick. Core CPI inflation rebounded a modest 0.1 percent, following a 0.1 percent dip in January and matching consensus expectations. A number of weak components point to the fact that inflation pressures, indeed, are subdued. Shelter costs were flat in the latest month while declines also were seen in apparel and recreation.

Looking at detail, the energy component of the CPI declined 0.5 percent in February after jumping 2.8 percent the month before. Gasoline temporarily eased 1.4 percent, following a 4.4 percent jump in January. Food inflation slowed in February to 0.1 percent from 0.2 percent in January.

Year-on-year, overall CPI inflation fell to 2.2 percent (seasonally adjusted) from 2.7 percent in January. The core rate was slipped in February to 1.3 percent from 1.5 percent the month before. On an unadjusted year-ago basis, the headline number was up 2.1 percent in February while the core was up 1.3 percent.

Today's report leaves a lot of room for the Fed to keep rates low for some time. On the news, Treasury yields edged down and equity futures rose slightly. At the same time, initial jobless claims came in very close to expectations.


My only take from this report is that the economy is not inflating. Meaning QE will likely remain in some form until the Fed raises rates.

It is a beautiful day in New York. Take some time away from the terminal and get some spring air. I am likely heading up to Newport, RI later tonight. Enjoy the rest of the trading week.

Currency Update: 03.15.10

I think an important question for those trading major pairs is whether or not the dollar strength has lost its luster or is there more strength to come in the second quarter. Looking in the longer term frames, the 3rd and 4th quarter seem promising for a return to dollar weakness based off the technicals.

Any fundamental justifications come to mind? Greek Debt situation resolved? Political unrest in the UK quelled? Central Banks ramping up QE once again. Continued stale low interest rates? Tame economic data? Decrease in risk aversion... inflation?

What are you guys betting?


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Alexander Lê
Managing Parnter
Analyze Capital LLC
email: analyzecapital@gmail.com

JPY Trade Update: 03.16.10

Gross P/L for a little over 1 and half weeks stands at $2,500 with 1 standard lot long the JPY. Green arrow indicates entry. A little sloppy on the entry, but for the trend captured it was decent. Trade indicators still indicate upward movement by the end of this week into next week. Will consider taking profits.




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Alexander Lê
Managing Parnter
Analyze Capital LLC
email: analyzecapital@gmail.com

JPY Discussion - 03.08.10

Time Lapse of Tokyo:

Tokyo/Glow from Nathan Johnston on Vimeo.

A very good discussion of the JPY movements at the Lord of Trading

JPY DISCUSSION <-- Click here to join

Here's a quote from the discussion:



"A couple of hours after I wrote this, Japanese media speculated (also) that Japan would consider further easing of monetary policy. Very very soon, the time may have come but we still have the time, the target is 100+ guys! ..." -Sauros


I'm currently long myself, though tomorrow won't be watching closely. A very busy day, I do have my tight stops and risk management in place though. Will update through out the week.


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Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com