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 DailyJobsUpdate.com, 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.