What We're Reading

"The market is not cheap but it is not especially expensive either," writes Laszlo Birinyi, calling for the S&P 500 to take out 1,970 between now and the end of September.

Lackluster economic data, so-so corporate earnings, and blowups in many Internet, social media, and biotech names aren't a concern, but instead a positive.

"The overall market is shrugging off the tech and biotech problems, and that’s important ... [it's] “the last stage of a great bull market. It’s the exuberant phase.”

Is that what the 10yr is signalling?  The EU doesn't have the mechanism to launch quantitative easing.  Raising rates would pressure their recovery.  Has Draghi painted himself into a corner? 

The U.S. is having to accept the "taper" while slow growth persists.  Maybe it's time to get back to reality and fundamentals.  Actually that works for me because I'd much rather buy stocks with S&P500 at the 100week than "here".  Only time will tell but hedging and shorts are (finally) working.

The 10yr is definitely not happy and is trying to bounce off of 2.6 but if that goes.........look out for more pain (for equities).  Seems as though sell in May was a good idea after all.

Enough said

Presented without commentary.

If there were ever tops, here's what they potentially resemble with heavy volume (distribution) accompanying.  As GT pointed out, the "megaphone" patterns also resemble "diamond tops" and take one guess which way these appear to be leaning? (click images to enlarge)   Trade the direction of the break, but it's ain't looking too pretty folks.  Stayed hedged or stay on the sidelines.

For what it's worth, here are four inverse, leveraged ETF's on my radar.   As with the tops shown above, nothing has broken out (yet).  Again click the image to enlarge.

Reasons the market looks ready to pull back May-July:

1. Treasuries have a relentless bid recently, and as I have discussed recently there was major accumulation of 80,000 Treasury (TLT) July $113 calls. Although this is just one large position, action in the TLT has tended to be right, and can see my call from 2013 to short the TLT in the 120's before it crashed to below 105.
2. Sector flows showing a flight to safety. The consumer staple names and large caps are starting to outperform, a risk-off market, and options action dictating the same with most of the sizable call buying occurring in boring large cap names like McDonald's, Wal-Mart, Pepsi, along with Energy.
3. Seasonality - The market tends to struggle in the May-July period, and although I do not have the numbers on me, @RyanDetrick is always posting great data, and also aligns with the Presidential cycle.
4. Price-Action in Momentum - I am watching a premiere growth name like Under Armour (UA) post a fantastic quarter and trade down 1

When Louise Yamada talks, I tend to listen.  We'll be watching closely the next few days as the market back fills and if individual names fail at their 200d and 50d.  Will more double tops form and still other head-and-shoulder tops fail as their neckline are tested?  Some still feel the market is fairly valued.  Some still feel the market has gotten ahead of EPS.........and earnings (expected to be very lackluster) have just begun.  Let us not forget "sell in May and go away" fast approaching and as Louise points out, distribution tops can take quite some time to develop and sell.  I'm tempted myself to hit the road.  Aruba is calling my name.  Wall of worry is one thing but low-to-no earnings is another.  Only time will tell.

In full disclosure, several members are scalping longs here common in USO, UNG, FB, FEYE, BAC, GILD, V, RHT (and various option plays), having bought on Mondays low but all seem to be expecting failure at one point.  If you cannot be nimble, you may want to sit

With July behind us, it was once again to review monthly charts and many were quite interesting.  The S&P500 negated it's monthly sell signal in May by exceeding it in July.  Not only that, but prior 2000 resistance clearly turned into support in June with the market confirming that market strength with a solid July close near the high.  My stop (alert since I don't use stops) is now below June's low.  (Click charts to enlarge)

Why the market strength?  It could be any number of reasons (or none of these at all):

• The belief QE will remain the new normal with such a weak jobs recovery
• Global easing
• Money is coming in off the sidelines (doubtful)
• Money coming out of bonds into equities (some is but not all)
• Belief that Europe and Asia have bottomed
• Housing recovery and the amount it contributes to job growth and GDP. 
• Hope Obama's proposed Corporate tax cut passes
• Anticipation of China growth
• Anticipation of earnings growth
• Well the pundits said the 2nd half of t

One of my favorite scans for a trade in the stock market is looking for setups with a tight Bollinger band squeeze with divergence (just ask our member Donald) but this end of month was different.  I was looking for confirmation of something more....ominous.

In case you missed it, the S&P500 exhibited a rare (and solid) piercing of the upper monthly Bollinger band in May which was met with immediate selling pressure.  To many technicians, merely piercing the upper band raises a warning flag as quite often it indicates the market will revert to the mean, or at a minimum the nearest support. 

The Bollinger band mantra goes something like this:

• Buy when the price falls below the lower Bollinger band
• Sell when the price pierces outside the upper Bollinger band

and boy......did they sell! 

I call it "rare" because normally price is contained within the Bollinger band and actually piercing the upper band with such severity only occurs every 5-10 years or more.  Of course a nays

Is it possible we are in the early stages of an enormous secular stockmarket bull run?  We talk about this continually in Chat on StockBuz.

Since 1900, there have been four large stock market basing patterns which exceeded 12 years in length:

• 1906 to 1924—18 years
• 1929 to 1955—26 years
• 1966 to 1982—16 years
• 2000 to 2013—13 years

What prior breakouts had in common is investor behavior reflected an underlying distrust or disinterest and characterized by underinvestment in equities.  This results in a rebound that is relentless (emphasis mine), providing little opportunity to buy on pullbacks.  To put it bluntly, the distrust creates so many bears, that the inflow of bulls plows them over and with minimal pullback, they've forced to cover higher and higher...............fueling the market (my words - not in the article)

How and what caused those breakouts to sustain is a point of discussion in this Raymond James presentation  (courtesy of MarketFolly)

Also reviewed is

It's not just about big business being able to borrow and refinance debt at low (ZIRP) rates.  It also impacts home buying affordability, consumer spending, higher chargecard APRs for the little guy who can barely afford it and yes, yield for the big dogs.  From an investment standpoint, large investors will pay attention.  As an example the 10 year yield is now at 2.15.  Yesterday, it crossed the dividend yield of the S&P 500. This means it is now more profitable to buy bonds than to invest in the stock market.  An interesting perspective.  Check it out at MrTopStep

“There is time to go long, time to go short and time to go fishing”  -Jesse Livermore

"What happens after a fast, high-volume 2-3-day sell off. There are three major scenarios:

     - a stock move sideways on a low volume as it finally find bidders. Some will interpret this price action as the forming of bear flag. Others will look at it as the forming of a new base, which is an important prerequisite for higher prices in the future as it is likely to attract fresh money. Both groups could be right and that dispute will be solved only by price – in which direction is the stock going to break out from its new range.
     - a stock continues to fall down in an accelerating fashion, breaching all obvious support levels; such action often leads to a sharp V-shaped recovery at some point as shorts decide to cover and new longs enter, attracted by the new price levels;
     - a stock bounces sharply from one of its rising major moving averages, as the 50-day for example. Those that are to

This from Alan Abelson @ Barrons  *Tis' The Season To Be Wary* [subsrciption only]

The deep freeze. No, no, we're not about to do a reprise on the credit collapse back in 2008-2009. Hey, this is the season to be jolly. The freeze we're talking about is neither financial nor metaphorical but climatic—the real thing, that dumped who knows how much snow on Northern Europe, grounding thousands of flights, making life miserable for any poor souls who had to get out and about, and further constraining the populace's shopping impulse, already chilled by the cold winds of economic austerity.

Do you need any greater evidence of how desperate folks are than the dispatch from Berlin that told of how two men dressed as Santa Claus strolled into a supermarket, whipped out a pistol and robbed the joint? Although the report of the incident is lamentably shy of details on motive, one can only assume the faux Clauses were among the involuntarily idled, obviously short of means and unable to face the p

I don't agree with this particular count either, but I think it's worth taking a look at. He certainly could be right...I do think the 1158 target makes sense as a short-term objective, though. http://bit.ly/cFMZ7p