Friday’s Trading – 4/30/2010

Futures pushed a couple of points higher over night, but fell back when the GDP number at 8:30am came up short of the consensus estimate. Breadth got stretched to the upside yesterday, so without a positive catalyst, the bulls may encounter tough sledding today. Chicago PMI at 9:45, Consumer Sentiment at 9:55, and then the crickets take over.

NASDAQ-100 Golden Cross

The NASDAQ-100 is trying to make a “golden cross” on its weekly chart. A golden cross occurs when the 50-period simple moving average (green line) crosses above the 200-period average (blue line). See the red arrow (click chart to enlarge):

The last time this happened was the week of September 10, 2004. The NDX closed that week at 1413, and over the next three years rallied up to a peak of 2239:

This is a rare bullish event. My charts don’t go back far enough to find another occurrence, though there could have been one after the 1987 crash.

The S&P 500 will need to stay strong for many more weeks before it can make a golden cross of its own. The last time, it crossed up several weeks before the NDX did, on July 23, 2004. This time, the NDX is leading, probably because of Steve Jobs, and the absence of banks in the index.

Wednesday’s Trading – 4/28/2010

Dunce Work
What did I tell you about the European Union of Dunces? And now that the EUD is flying apart, what are the chances that the Fed will say or do anything hawkish today at 2pm? Got to be zero, right? But what about the ECB? What if they go nuclear, and start buying government bonds in the open market? Will we be treated to the “Greece is Saved!” Rally #7?

God Works for General Motors
What happened to CNBC? This new “politicians shouting at bankers” channel sucks, though I do enjoy the four-letter words. The best part came just before 10pm when David Faber asked Lloyd Blankfein about his “doing god’s work” comment. Being under attack as he is, you might think that Blankfein would strike a humbler tone, or say that it was a sarcastic comment intended as a joke. But no, he did no such thing, and spoke along the lines of “what’s good for Goldman Sachs is good for America”. I can tell you one thing for sure about Blankfein: he will never be a politician. Note to Blankfein: stop painting targets on your clueless self. (The video of the interview is supposed to be here, though it wasn’t working when I tried to look at it.)

Tuesday’s Trading – 4/27/2010

Propaganda Machine
Zero Edge posted yet another comically inaccurate withholding-taxes chart yesterday. However, I will no longer be commenting on what they do as I now believe that the mathematical errors are willful instead of simply the result of incompetence. Zero Edge is clearly dedicated to the production of bearish propaganda, just like CNBC puts out bullish propaganda. And there is no point in arguing with beartards any more than there is in arguing with bulltards. In other news, The Fly is making fun of Zero Edge too in his hilarious cartoons.

Zero Edge Scores Another 0.0

I almost choked to death while laughing with glee when I saw these two bars on yet another moronic chart from Zero Edge:

Those bars are supposed to be a tally of withholding-tax collections from the 14th week of last year and the 14th week of this year. I’m sure that it looked perfectly normal to a poser like “Tyler Durden”, but to an actual expert on the subject, such as myself, it was a blatant error. The IRS often rakes in that much in a single day, let alone a week! The actual numbers are much larger. So, to grade Mr. Durden’s work, I must award him another:

And what about Zero Edge’s readers who commented on the post, many of which took shots at me? Not a single one of them caught the error! Big, floppy clown shoes all around!

Hang your head in shame Zero Edge community!

In your collective face!

Also, let the record show that Zero Edge is still refusing to acknowledge the giant withholding-tax cut implemented in 2009. To adjust for that would make their charts look much less dire. And we couldn’t have that, now could we?

As always, the only accurate and unbiased presentation of this vital data can be found at, which is operated by your hero (that would be me in case you are confused on the subject.) And, I will have you know that I publish charts both with and without adjusting for the tax cut, which is the only honest, professional way to present the data.

P.S. In case you are wondering, there is no disaster happening with the withholding data.

Triangle Trading – 4/23/2010

Here is the triangle on the SPY 15-minute chart that George has been talking about (click to enlarge):

The blue line is the 36-SMA and the green line is the 9-SMA. Prices flopped in the post-market right after the bell, so maybe the market is planning another trip down to the lower line. That’s a bearish factor. But prices also briefly pierced the upper line (red arrow) just before the close before falling back below. The fact that they were able to pierce the line at all is a bullish factor. That’s exactly what happened in our last triangle on April 8th just before it broke out to the upside. Here is the chart that I posted back then:

At the black “3”, you can see prices pushing above the upper line before falling back below, though that was a much stronger push than the one SPY made on Thursday. Here is how the chart developed:

SPY gapped up the next morning, dropped back into the gap, didn’t quite fill it, and rallied the rest of the day. So that is a potential model for today. Another model is a drop back to test the lower line again, and then rally up and out. And the bearish resolution might look like George’s Triangle from the October high:

Note the false breakdown, another run up to the upper line, and then the ultimate breakdown. So, be ready for some treacherous swings, and watch the 9/36/15 crosses. The breakout should project to about the height of the triangle, and the current one is about 25 SPX points. So, that will be an excellent move if you are on the right side of it, and rather painful if you are not.

Also, look at the purple line on the first chart. That’s what I call a “turbo line” since it is steeper than the lower, red triangle line. On another downswing, it may provide support, and if it does, then that would be a bullish factor since it would indicate that dip-buyers were very eager to come in.

And look at the big blue “X” on the third chart. The apex of a triangle becomes an important level in itself, and you will often see prices return to test that level.

So, in summary, we should see a breakout today, whether up or down, it should eventually extend to 25 SPX points, and a few days later, we might see a retracement that approaches the apex level, which I have at 1205. Easy as pie, right?

My blind guess would be a bullish resolution. If you look at the fourth chart, you see the 36-SMA (blue line) drifting relentlessly downward throughout the entire triangle. We don’t have that this time.

Tuesday’s Trading – 4/20/2010

The market didn’t make the falling-wedge pattern that I said to keep an eye out for yesterday. But SPY did make another reversal pattern: a double bottom, which you can see on the intra-day chart. However, the SPX was unable to get above the left-shoulder level of my H&S chart at 1199. It will try again at the open.

Monday’s Trading – 4/19/2010

Shocking Cultural Decline

Here’s historian Paul Johnson on the British bankers of 50 years ago:

“At the local level the men who ran the banks in the high street were popular and trusted and were regularly conscripted onto every committee that mattered. In the City of London the top people formed a regulatory agency in themselves and dealt swiftly and severely with anyone who fell short of the highest standards of integrity.”

And on Friday, we were treated to the spectacle of Jim Cramer on CNBC boasting about how the feds were not able to make anything stick to Bear Stearns and Lehman Brothers, and won’t be able to make anything stick to Goldman Sachs either. Quite a contrast, is it not?

Don’t Make Me Laugh
Zero Edge offered me access to the “primary” withholding tax data. Why would ZE call the Daily Treasury Statement the “primary data”? Because that’s the way a pompous ass talks. And not only do I have every number ever published by the Treasury Department stored in a MySQL database, but I have been updating it every day at 4pm since before Zero Edge even existed.

The TARP Gap Strikes Again
On Thursday, SPY topped out just pennies above the upper boundary of its TARP Gap (blue arrow), and on Friday, it closed just pennies above the lower boundary (black arrow). Amazing how those levels acted as magnets, no? (click chart to enlarge):

Here is a chart showing the potential head-and-shoulders reversal pattern on the SPX that I mentioned in the comments on Friday afternoon:

It’s not a large pattern, and may only deliver a modest correction. The blue line shows a target near 1161, which is near the March 26th low (blue arrow). Also notice that the green neckline is slanted downward, and the right shoulder level is lower than the left shoulder level. Those are signs of weakness and may indicate that the pattern will go lower than the standard target.

HOWEVER, this is still a bull market until proven otherwise, so bearish patterns must be expected to have a higher-than-normal percentage of pattern failure. This market loves to decline in a falling-wedge pattern before barbecuing the bears, so be alert for the telltale wedge.

Clown Olympics

Whose clown shoes are bigger? Jim Cramer’s or “Tyler Durden’s”? Whose rubber nose is redder? Whose horn is louder? Inquiring minds want to know. We are all familiar with Cramer’s antics, but what about Mr. “Durden’s”?

On February 21, 2009, the IRS issued new withholding tax tables, and instructed every employer in the USA to withhold less tax from the paychecks of workers. Mr. “Durden” was ignorant of this fact, and when informed of it proclaimed through a special clown megaphone: “Tax cuts do not affect tax collections!

Note to Mr. “Durden”: seriously dude, stop speaking on this subject. Sure, the fanboys in your personality cult will believe anything that you say. But out here in the real world, there are people who are actually able to think clearly and objectively. And thanks for the invite, but I will not be joining your clown show. Big floppy shoes just aren’t my style.

Note to readers: If you get all of your news from CNBC, then you never heard about the “Making Work Pay” tax credit. That was a tax cut for the little people; the worker bees for which CNBC cares not. You saw endless hours of Larry Kudlow haranguing President Obama for tax cuts for the rich, but you never heard him make one peep about the MWP, right?

Matt “The Plumber” Trivisonno

Look at this doofus trying to spin me into a typical paranoid psychotic Zero Edge conspiracy theory. Ridiculous! I am, literally, just a guy running some numbers through a spreadsheet. Sure, various things exploded in my vicinity during my recent trip to Iran, but I swear it was all coincidence!

I could have published my critique on my own blog, but it makes a bigger splash on Barry’s blog. The bigger the splash, the more people that come to my site. It’s just good business. I will also have you know that I was short the market this morning, and have recently been talking constantly about the resistance that the market would find at SPY’s TARP Gap. So, I wrote something bullish while I was short. I’m sure that the idiot commenter linked-to above can’t comprehend why anybody would do that. But I happen to be more motivated by integrity and making the best analysis over making money. That’s just the kind of guy I am, and it also happens to be one of the reasons why I am able to attract and hold a decent-sized audience of very intelligent people.

On May 4, 2009, I wrote a post titled “Super Fly” where I stated that I would no longer be reading Zero Edge. At the time, most of my readers were bearish, so I was trying to lead by example. I hope you people got the message. Did Zero Edge steer you wrong over the past year? Ha! Not only did they steer you wrong, but they steered you right over the lip of an active volcano and down into the lava! You’re just a skeleton now!

Note: “Plumber” is the traditional cover-profession of CIA agents.

Note: I did not go to Iran, and have never detonated anything larger than an M-80. That was a joke. Did you hear that Zero Edgers? A joke, damn you! I had nothing to do with this attack. Even you Zero Edgers can see that I have not blown myself up.

Note: I am not terribly eager to take on Zero Edge and its band of crazy people, because they are, like, way crazy. But as the Sheriff of Withholding Town, I have sworn duties to perform. Note to Zero Edgers: go back to doing whatever crazy BS it is that you do. But don’t let me see you ’round Withholding Town no mo’.

Friday’s Trading – 4/16/2010

Thursday’s rally stalled out at the top of SPY’s TARP Gap. Here is the chart of the gap that I posted on April 6th:

Here is what it looks like now (click to enlarge):

SPY clawed away at the 121.37 resistance all day (blue arrows), but couldn’t close above it and gave up the struggle with a closing price of 121.31. The gray box in the center of the gap is the up-gap from Wednesday morning; more on that in a minute.

SPY repeated the same pattern that IWM did when it met the resistance at the top of its TARP Gap on Monday: it was able to push above, but not close above. See the blue arrow on this IWM chart:

IWM then corrected to a bit below the center of its gap on Tuesday (blue “x”), reversed, rallied, and closed just above the top of the gap (red arrow). The close-above was a sign of strength, and IWM had a gap-and-go day on Wednesday.

I have no idea if SPY will act the same way, but the futures are down to 1202 as I am writing this Thursday night, so it looks like SPY may pull back on Friday. If so, then Wednesday’s gap shown on the second chart becomes an obvious downside target, and the 120.05 area is a logical place to be alert for a bounce.

CNBC’s Egregious Lies

On January 10th, I wrote about CNBC’s lying about mutual fund flows on their “Fast Money” show. Bob Pisani tried to put a stop to it, but he was obviously told to back off. And the flat-out lying propaganda continued right at the start of Monday’s episode of Fast Money:

Notice that they show a chart of market performance on the so-called “Mutual Fund Mondays”, but they have never shown a chart of actual mutual-fund flows. Curious, no? Well, there is a good reason why they don’t show such charts:


Here are the charts. This data comes from the mutual-fund industry itself. The first chart shows weekly inflows/outflows going back to January 2009:

Does it look to you like the public has embraced this rally? Not so much, right? Here is the same data charted to show cumulative flows, or a running total:

Not only has the public not embraced the rally, but THEY HAVE PULLED OUT $60 BILLION!!!

OK, now you might argue that the public is buying individual stocks or ETF’s instead of sending money into their mutual funds. While I believe that is unlikely to explain this amount of redemptions, it is beside the point. CNBC is calling it “Mutual Fund Monday” not “ETF Monday”, right?

So why is the market rallying on Mondays? Easy. It’s a global economy now. And as things have improved, Asian and European markets have rallied over the weekend. On Monday, those bullish events get priced into our market.

Now, since I first brought this up back in January, it has become common knowledge. Everybody knows that the retail investor has not come in, and many other people now chart the same data. So why does CNBC persist to the detriment of their reputation?

Note: Kudos to the mutual-fund industry for publishing the real data for us.

Note: The charts above are updated every Wednesday in the subscriber section of

Tuesday’s Trading – 4/13/2010

The SPX couldn’t quite tag 1200 today as it ran afoul of one of my TARP Box levels. The fourth level up in the box is 1199.08, and the SPX topped out just 0.12 points above at 1199.20. How’s that for accuracy? See the black arrow on the chart (click to enlarge):

The market has stalled at each of the TARP Box levels (red arrows), short-lived though the pullbacks may have been. The next level up is 1209.37, and if recent history is a guide, we shouldn’t arrive there for at least a few days.

The IWM pushed above its TARP Gap on Monday, but was unable to close above it. That might be a small sign of weakness. SPY advanced about a third of the way into its TARP Gap, but it seems like it may need to take a rest before pushing on to the summit.

Vix Vs. Vixen

The VIX made emphatic its death cross on its weekly chart last week (click chart to enlarge):

The last time this happened it was a very bullish signal, so make sure to see the chart that I posted on March 15th when I first mentioned it.

But that’s the weekly chart. On the daily chart, the Vix is close to giving a sell signal. And while it has not closed below its daily Bollinger Bands yet, the NASDAQ-100’s Vixen certainly has. See the red arrow on the chart:

The last time the Vixen came close to giving a sell signal was in mid-February (blue arrow), and the market did indeed take a little spill at that time. The low reading on March 18th also delivered a rare down-day in this melt-up market.

So, something for the bulls, and something for the bears. Everybody should be happy now.

Donaldus Magnus

Every time an establishment figure talks about China, they always say the same thing: “The world will end if we don’t send all of our jobs to China.” But the truth is the exact opposite, as I have been saying for years. And now, a great man, Donald Trump, is telling it like it is: the Chinese think that we are suckers and are laughing at us:

At one point, Trump mentions how all the jobs that we have sent over there are keeping the Chinese working, and then says: “But what about our people?” What, indeed. Note to any American who works for a living: nobody in Washington cares if you have a job or not. Make Trump dictator and send him to DC to bust some heads.

Trump is also right about OPEC. High oil prices always cause a recession, and they certainly were a huge contributor in 2008.

Note: Listen to how high and trembling Cavuto’s voice gets at the end.

Friday’s Trading – 4/9/2010

Is Greece Lehman All Over Again?
This Greece situation is starting to remind me of the Lehman collapse. Remember that one weekend in 2008 when all the powers-that-be met in New York to fix the problem? Remember all those rich guys in limos coming to save the day? And instead they blew up the whole world? Who knew that the powers-that-be were in reality a Confederacy of Dunces, right? Well, these euro dunces aint got nothin’ on our dunces. I am entirely confident that I should have no confidence whatsoever in them, and I wouldn’t be the least bit surprised to see Greece default and blow up the EUD (European Union of Dunces).

Note to Bulls: Gird Your Loins
Robert Prechter was on Fast Money last night and said that this is the third-greatest shorting opportunity of a generation. Since the economy is expanding, I think he will be proven wrong, however the hysterical reaction of the Fast Money traders should send a chill down your bullish spines. Watch the video and see if you don’t agree. They said that it was totally impossible for the market to top-out here, and that’s a sign of extreme bullish sentiment.

Prechter also said that he called the bottom in March 2009. But did he really? Yes and no. In this video from February 27, 2009 you can see him saying “there is plenty more bear market to come” (sorry, CNBC took the video down). However, he did make a good trade by covering his short position, so I would say that he got it right enough.

Triple Peaks
Here is 15-minute SPY chart showing George’s Triangle from the October top (click to enlarge):

Notice the three descending peaks marked “1”, “2”, and “3”. Now look at the “X”, which marks the spot of the final 9/36 cross-down. The green line is the 9ma and the blue line is the 36ma. After making a few whipsaws, that last cross-down kicked off the pullback.

SPY is making a similar pattern right now:

On Thursday afternoon, SPY did punch above the upper triangle line, but was unable to hang up there. The fact that it was able punch it at all may be a bullish omen, but we still have three descending peaks. The Fast Money traders probably went long at peak 3, just before the market dropped into the close. So, that’s probably why they were so touchy: they are worried that they are caught in a bull trap.

We don’t have a tight apex on the triangle yet, so in a bearish resolution, we might see SPY drop to the lower triangle line, then rally one more time back up to the upper line to make a fourth descending peak. In a bullish resolution to this setup, SPY will refuse to drop to the lower line, and eventually melt-up some more.

The moral of the story is: watch that next 9/36/15 cross-down; it might be a doozy.