Monday’s Trading – 2/1/10

On the morning of January 11th, I wrote:

“The SPX’s 200-month moving average is at 1156, which is also the top of the Box of Beer. That confluence should provide some sort of resistance.”

As it turned out, it was lethal resistance, and now another important moving average is coming up. The SPX made a brief bounce at its 20-week MA before falling through. Now it as approaching its 100-week MA, which is at 1060.38.

The charts are a horror scene without the slightest sign of even a fledgling bottoming pattern. If the market can’t hold inside the November 9th gap, where it is now, a trip down to the 100-week MA seems likely. If the bulls can’t circle the wagons there, then the next rung in hell is the November 6th gap at 1046.50.

If the market can’t stabilize on prospects for a positive jobs report on Friday, that would be a rather bearish omen.

Cloud Schmoud

Oracle CEO Larry Ellison mocks “cloud computing” and rightly so:

In my control panel for trivisonno.com, there is a link for cloud computing. When I clicked on it, it took me to a set-up screen for virtual machines. OK, I suppose you can call a virtual machine a cloud if you want, but virtual machines are nothing new. I saw my first VM over 20 years ago. It ran Windows on the Macintosh – very, very slowly.

Friday’s Trading – 1/29/10

On Thursday, the SPX closed at 1084.53, which is only 0.27 points off of the threshold of the Box of Beer (1084.80). How’s that for accuracy? The Fibonacci analysis that I did four months ago determined that to be a key level, and so it has been.

If the SPX can’t hold in the Box of Beer, it will fall back into the Box of Bulls where the first substantial support level is 1068.11. And, as befits an important Fibonacci level, there is a large unfilled gap right there. That gap opened on the morning of November 9th, and the market never even came close to filling it. This is the gap that George has been showing on his weekly charts.

For SPY, the gap is between 107.16 and 107.87, and it’s a fat, juicy target for this sell-off. If the market does indeed dive down there, it should find some sort of support. How long it lasts is another question.

Also, I think there is a decent chance that next Friday’s jobs report might show that the economy created a few jobs in January. Let’s see what Bloomberg’s survey of economists shows on Sunday.

Thursday’s Trading – 1/28/10

The USO closed below its 200-day moving average for the first time since July 30th. Sagging oil doesn’t say much for the strength of the recovery.

The iPad had better not be another Newton or AppleTV. If it doesn’t sell well, Steve Jobs will rue the day he called it a “magical device”. In fact, people will call it the “tragical device”, to coin a phrase. You heard it here first. Google “tragical device” and see for yourself.

Of course, the way netbooks sell, it looks like the iPad will be a winner. So nobody will use my phrase – at least not on the iPad. Maybe on that Google phone…or the Kindle.

Wednesday’s Trading – 1/27/10

Fall Guy
Somebody’s got to be the fall guy for Massachusetts, right? For a while there, it looked like it was going to be Bernanke, but he seems to have acquired enough votes to get re-confirmed. So now it’s Timmy Geithner’s turn on the chopping block for the AIG Bailout scandal.

And that means that we now have four mega-events for the day:

10:00am

AIG Hearings/Geithner Execution
1:00pm

Apple Product Announcement
2:15pm

FOMC Announcement
9:00pm

State of the Union Speech

At least one of these should provide some fireworks for the market.

Tuesday’s Trading – 1/26/10

Loose-Cannon Mode
Obama’s announcement of a spending freeze last night shows why the market has sold-off: The Massachusetts Massacre has thrown the Democrats into “loose cannon mode” where they flail around wildly trying to figure out what the voters want.

I would be shocked if our government ever actually reduced its spending. Clearly they (both Republicans and Democrats) are going to spend, and spend, and spend – right off the cliff of national bankruptcy.

So, I don’t think the budget “freeze” itself will have much of an impact on the economy, and is probably just a trial balloon for some last-minute edits to tomorrow’s State of the Union speech.

But the market does not appear to have much confidence in our new “Random Style” of government.

Monday’s Trading – 1/25/10

Flipper Flattened
I tried to warn those poor dolphins back here:

“…the Vix is telling us that everybody has rushed to one side of the boat to look at the cute dolphins, and the boat is about to flip over crushing said dolphins under thousands of pounds of fat, blubbery tourist flesh.”

…but the glutenous bullish tourists were so obese that the poor fish never stood a chance. It was a hell of a splash though, was it not?

Monster Withholding Chart

I have never posted this particular chart before, and now seems like a good time to discuss it (click to enlarge):

This is the detailed version of the smoothed chart that can be seen here. Each dot represents the annual growth rate of federal withholding taxes as of that day.

The first thing to notice is that at the bottom of the last recession in 2002 (marked “2H02”), it took a solid six months for the data to stabilize before it began to move upward. After the economy ceases to recess, businesses still don’t hire until they are forced to do so by increased demand. And the time spent in such a purgatory can be substantial.

In 2003, the growth rate flattens out (marked “Tax Cut”) because there was a payroll tax cut passed into law. Economically, it wasn’t really needed because the economy was already expanding via an historic housing boom.

The growth rate at the peak of the cycle in 2006 crested around 8%, which was 2% below the peak of the dot-com bubble which exceeded 10% six years prior. That was a lower high. And in 2009, the growth rate plunged well below the trough of 2002. That’s a lower low.

So this chart, with its pattern of lower highs, and lower lows, paints a picture of long-term decline. I’m worried that our decline will continue until the USA reverts to a pre-NAFTA trade policy and brings the factories home.

In The Nineties, we had a massive internet-building boom, and an industrial base. In The Zips, we had a massive house-building boom, phony though it may have been. What massive project do we have now that will provide millions of new jobs? Does anybody see anything?

(Note: subscribers to The Daily Jobs Update can see the real-time version of this chart at the bottom of this page.)

The Zips and The Teens

Since nobody could decide on what the first decade of this century should be called, I will make the decision: The Zips.

And to preempt another embarrassing lack of decisiveness on the part of this nation, I will also name the second decade: The Teens.

Now it’s official. Deal with it.

(Note: there will be no comments allowed on this post. Exactly which part of “official” don’t you get?)

Kaboom! Goes the Populist Time Bomb!

Joe Sixpack is not happy about having his job sent to China. And he is not happy about our brand new Jobless Economy. He yearns for the good old days of a mere Jobless Recovery. But being faced with infinite unemployment, Great-Depression style, mounds of federal debt and the consequent higher taxes and/or inflation in the future, he has retaliated by putting an end to the Kennedy Dynasty in Massachusetts.

President Obama got the message. And now he is trying to get out in front of the populist tide democrat-style, which means persecuting big business.

So, as traders, it is time for us to think about how this tectonic shift in American politics will play out. A couple of things come to mind:

The IWM was only down 1.96% today while SPY was down 2.20%. Perhaps small-caps will outperform since the dems will get more bang for their populist buck by harassing higher-profile large-cap companies. Example: George’s BBT had a good day today while GS got hammered.

I think it’s safe to say that if the Fed were to raise rates before the mid-term elections in November that a White House goon squad would open a can of Vince Foster on Bernanke, and his body would be found in a Maiden Lane dumpster.

If you have populist predictions, please post them in the comments.