Author Archives: Tom

21 Feb

21 Feb Art Cashin’s Comments

Art Cashin on Wall Mart – which accounted for 70 or the 250 points lost on Dow yesterday:

Walmart Goes On Sale And Takes The Dow Jones With It – Walmart reported mildly disappointing earnings. The bears, however, homed in on weak online sales performance and drubbed the stock for its worst performance in 30 years.

The early tone quickly shifted to the negative and by the time the opening bell rang, most of the 11 industry sectors in the S&P were clearly learning negative. The energy sector was the odd man out as it rose as crude firmed.

The selling was light but persistent and the weakness continued into midmorning. The bulls seemed to circle the wagons as the Dow hit 25,000 and the S&P hit 2720. What then followed looked a bit like a rally but it was more like a low volume levitation or “drift” higher.

The S&P managed to make it back into mild plus territory but the Dow came up short. As we slipped into early afternoon, it became evident to a few of us old timers that the next likely mood would be a rollover and a retest of the morning lows.

Sure enough, by 1:00, the air began to come out of the balloon. No sharp selloff but a drift lower that was the mirror image of the post-opening levitation.

By 2:45, they were set to retest the morning lows. It soon became evident that the bulls had failed to study for the test. Stocks slipped through the lows with nary a stutter. Selling accelerated a bit and by 3:15, we reached what would be the day’s lows. From there, they had a half-hearted bounce as the market on close sell indications contracted a bit.

A waste of carfare and a clean shirt.

Overnight And Overseas – In Asia, Shanghai remains closed for the Lunar New Year. Hong Kong was open and in full celebration mode, closing up the equivalent of 450 Dow points. Tokyo and India rallied far more modestly.

In Europe, markets are struggling in light volume. London is seeing fractional losses, while the dips are a shade more pronounced on the continent. Among other assets, Bitcoin has dipped back below $11,000. Gold is a shade lower after yesterday’s pronounced selloff. Crude is a bit weaker, with WTI dipping back below $62. Yields are basically flat in front of today’s auction and the release of the FOMC Minutes. The dollar is a shade higher against the euro.

Consensus – I said yesterday that certain gutsy traders called for a retest of the pullback lows. Yesterday’s action raises those odds to, maybe 35%. Watch Treasury auction and reaction to FOMC minutes. Stick with the drill – stay wary, alert and very, very nimble.

 

09 Feb

9th Feb Cashins Comments

On this day in 1825, the United States selected a President. No, not in an election but in the House of Representatives. Thus, ended one of America’s closest and most inconclusive elections.

The original list of candidates was unique. The favorite in the polls was a well-known guy from Tennessee. Breathing down his neck was a guy who was the son of a former president. That brought charges of dynasty. Additionally, there were splinter party candidates who might tip the results. In the fall election no candidate had received a majority of the total of either popular or electoral votes.

Andrew Jackson got 99 electoral votes. John Quincy Adams got 84. Henry Clay got 37, while, a fourth candidate, Wm. H. Crawford got 41. Crawford had been the Secretary of Treasury for eight years and might have been the logical compromise choice. But he suffered a stroke during the campaign and fell behind the others and out of contention.

So, in the House, Clay’s people threw their support, along with as much of Crawford’s as they could muster, behind Adams. So, Jackson, who had the most popular votes and the most electoral votes, was denied the Presidency. Jackson’s people never forgave Adams. They killed nearly every proposal Adams sent to Congress – – whether it was good for the country or not.

Thus, the plan for a national bank died. So did the plan for a national university. And the two opposing sides added so many “spite” riders to the tariff bill that it became a contributing factor to the Civil War.

To celebrate stop by the Constitution Inn. Sip an old fashioned, and nod knowingly as political pundits tell you today’s politicians are far too partisan and have lost touch with how the government used to operate.

Political partisanship played a small part in Thursday’s market smash-down but you almost needed a microscope to find that influence.

Bottoming Process Returns To Ugly – The highly volatile bottom forming process returned to its ugly phase and did so with a vengeance. Violent swings in a bottom forming effort aren’t always triggered by news or events. They can swing sharply on simple shifts in momentum.

I think Thursday’s sharp selloff may have been the result of a stew of influences.

Early on, Mark Carney, of the BOE suggested the Bank may have to step up the tightening process. His comments reinforced the recent worries about central bank tightening.

Then there were comments from bond guru, Jeff Gundlach. He suggested that the 2.84 level on the ten year tended to “kneecap” the stock market. He also said that the new equity turbulence would not be over in just a few days.

My friend, Doug Kass of Seabreeze Partners maintains we are still feeling the fallout from the earlier collapse of the inverse volatility instruments earlier in the week.

The bond action at 1:00 was absolutely awful.

Then, Bill Dudley, President of the New York Fed was asked by Bloomberg whether the market selloff might affect Fed policy. Dudley dismissed the market selloff as “small potatoes”. That seemed to inspire a bit of selling.

Some guessed that selling after 2:00 may have been the result of afternoon margin selling but there was no way to verify that.

Then there were rumors of “on the close” sellers and the selling continued into the closing bell.
A pretty ugly session overall.

Another Pair Of Eyes – We thought we’d quote our good friend and fellow market veteran, Jim Brown, the guru of Option Investor.

Here’s how he opened:

After a year of extremely low volatility, the new normal is extremely high volatility.
Unfortunately, this is normal and we have warned about this multiple times over the last several months. Long periods of very low volatility normally end with periods of extremely high volatility and it is not over in just a week or two.

Typically, after a volatility spike it takes weeks for the volatility to return to its normal range of 14-18 on the VIX. The following example shows the VIX spike to more than 50 in August 2015 when the S&P fell more than 235 points in five days. It took nearly two months for the VIX levels to return to normal. It took seven weeks before the S&P finally consolidated enough to begin a lasting rebound.

The economic fundamentals are much stronger in 2018 than 2015 and earnings are rapidly rising. It should not take seven weeks for the market to find a bottom but it may take several weeks before an actual rebound begins.

Due to format restrictions, we can’t reproduce Jim’s chart – but you get the idea. Jim closed his note with a strong caution on volatile Fridays. Never buy on Friday. You never know what is going to happen over the weekend and market declines on Friday tend to continue at the open on Monday. Experienced traders never buy on Fridays in a volatile market.

Friday’s can turn into flush days. Investors who have been trying to hold out all week could see the margin selling at Friday’s open and decide the market is going lower and the give up on hope as a strategy. They hit the sell button and kick themselves for not getting out earlier.
This is called a capitulation event. If it occurs on Friday, that is an even better sign for dip buyers on Monday. Remember, margin selling usually occurs before 10AM and again at 2PM.

The futures have been all over the place tonight. They were positive for a while, dropped to -10,
rebounded to +10 and are now negative again. This is investor indecision and traders trying to game the overseas markets.

Look for signs of capitulation on Friday as a buy signal for Monday.

Another good friend, the legendary Jeff Saut over at Raymond James often notes that selloffs rarely bottom on a Friday, if ever. I’m not prepared to say never but I will endorse the very, very rarely.

Overnight And Overseas – In Asia, markets were hit hard. Shanghai fell the equivalent of 1000 Dow points and has moved into correction territory. Tokyo, Hong Kong and India sold off heavily but not quite as harshly as Shanghai.

In Europe, where markets sold off sharply yesterday, prices are lower but only modestly so.
Among other assets, Bitcoin is down a bit and is trying to hold over $8000. Gold is a shade lower and remains within its resistance band. The euro is little changed against the dollar while yields are at tick or two higher.

Consensus – In ordinary markets, Fridays have a mild upward bias as shorts tend to reduce exposure in front of two days when they can’t trade but events can happen. Those are not ordinary markets by any means.

Stock with the drill – stay wary, alert and very, very nimble. Have a wonderful weekend!

08 Feb

8 Feb 2018 Telegram Trades

I post live trades via a Telegram App. It is free of charge, although at the moment the signals are written in Danish. I am going to change that soon to English.

DAX LONG POSITION

  • Entry:   variable entry at 12,500, 12510, 12520
  • Target: At the time target was 12,550, but momentum was strong at the time of target
  • Risk: either 10 points or 20 points, depending on risk tolerance
  • Time: 13:22 post was sent

Various entries at 12,500, 12510, and 12,520….

TARGET WAS FIBONACCI BASED… but was ignored

CLOSE UP of reason for entry and placement of stop-loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TraderTom, [07.02.18 15:01]
come on you annoying german index, who have disaapointed me so much over the last 6 months, since september last year…. are you going to turn around ….probably not… because that is all you have done to me… teased me relentlessly

TraderTom, [07.02.18 15:07]
DAX naaede 79.5

TraderTom, [07.02.18 15:08]
jeg har 3 aabne DAX posiotern lige nu til ialt omkring 200 point profit….. mit maal er naaet, men nu er jeg gradig… og alt andet stiger… jeg holder ved

At this point I am selling short FTSE

TraderTom, [07.02.18 16:00]
en trading ide kommer…. husk jeg er lang dax…

TraderTom, [07.02.18 16:01]
men jeg saellger ftse short nu i 7299.5

SOLD FTSE as a plain double top…. 10 point stop loss

 

 

 

 

 

 

 

 

TraderTom, [07.02.18 16:04]

DAX jeg lukker ned nu i 12630… FTSE stop loss er 15 point… max…..

TraderTom, [07.02.18 16:04]
vi ses i morgen

TraderTom, [07.02.18 16:05]
undskyld… DAX…. jeg lukke halvdelen ned nu… beklager…..

TraderTom, [07.02.18 16:30]
naaa… nu ville jeg have set godt ud hvis jeg havde lukket hele dax

TraderTom, [07.02.18 16:30]
jeg lukker FTSE nu inden 16:30

TraderTom, [07.02.18 16:30]
7274 for plus 26

FTSE was closed because the trading day was over… big mistake… it feel another 70 points, and I only got 26 points. The DAX was closed at 12,630 but only 2 of the 3 positions. It was a good call. DAX fell all the way back to entry, following Dow down.

 

 

 

07 Feb

7 Feb 2018 – Cashin’s Comments

On this day in 1904, smoke began to pour out of a fabric warehouse in downtown Baltimore. It didn’t look like a big problem and the fire squad arrived promptly. Unfortunately, so did a 50 mph windstorm. The wind, the fire and the fire cart decided to try for the same parking space.

The wind and fire won the race. The firemen and their cart regrouped down the block….but not for long. The raging wind swept the now raging fire from the six story warehouse to every other building on the block….and the next block and the next. The fire fighters and the city fathers regrouped. The police were called in to control the crowd of 30,000 displaced or curious. The mayor ordered that buildings in the path of the fire be dynamited to set a firebreak. But the windswept fire just burned across the rubble to its next target.

Area fire squads came in to help out….but hose fittings and hydrant taps were all different and the Samaritans turned spectators….so did everyone else. The wind and the fire died out after two days. The damage was over 2,000 buildings destroyed leaving over 140 acres of downtown Baltimore as rubble. The economic cost made it the second worst urban fire in American history – behind the great Chicago fire. So why isn’t the fire more famous? The answer may be that despite the thousands displaced, the buildings destroyed, and the millions of dollars it cost – the fatality rate was rather low – only one person died.

Traders could empathize with those Baltimore authorities as markets continued to whip around, seemingly out of control.

Bottom Forming Process Incomplete Suggesting Further Volatility – Tuesday’s market had many aspects of a bottom forming session but refused to give traders an outright “all done” signal. Stocks gapped down on the opening but well short of the heavy losses that the overnight futures had indicated. Accidentally, but conveniently, the limited gap in the Dow made it open right at Monday’s intra-day lows. That inspired buyers that quickly took the averages into plus territory. Traders then sat back and awaited a classic “rollover and retest” of the
mornings lows.

They got their rollover, rather quickly but the market refused to retest the morning lows.

Frustrated that the market refused to follow the “classic” retest pattern, traders switched to Plan B. An alternate pattern in a bottoming process would be a series of higher highs and higher lows.

The market again refused to match the pattern that traders were hoping for. Instead, it oscillated between the midmorning pullback levels and the post-opening spike.

In early afternoon, I sent an email to some friends summarizing the action so far:

The zigging and zagging is typical in attempting to form a bottoming process after a high volatility selloff. Watch to see if they attempt to retest the gap opening lows.

Around 2:30, word began to spread of a possible compromise on a potential spending bill in Congress. That seemed to inspire some buying and the Dow rallied to its post-opening high.

This time it didn’t stall and when it punched through, the buying accelerated. The buying slowed a bit but prices floated higher despite indications of nearly $2 billion to sell on the closing bell.

The on close sellers did not relent but the late momentum rally continued and basically gobbled up all of those sellers with barely a twitch. The late buying was rather broad with 9 of the 11 S&P sectors closing higher. Advances beat declines by about 5 to 2. The whipsaw action helped swell the volume to 1.4 billion shares.

May you live in interesting times!

Just A Coincidence, We Hope – UBS’s inimitable economist, Paul Donovan notes that the new Fed Chair, Jay Powell is a lawyer by training and not an economist. Paul further notes that the leader of the German Reichsbank in 1923 was also a lawyer rather than an economist.

That didn’t work out well, did it?

Overnight And Overseas – In Asia, markets are mixed with basically small changes. Tokyo saw a fractional gain – with modest losses in India and Hong Kong. Shanghai fell more significantly in partial “catch-up” to the others. In Europe, markets are bouncing modestly in lighter volume.
In other assets, Bitcoin is back above $8,000. Gold is virtually unchanged and remains within its resistance band. Crude is slightly lower with WTI trying to hold the $63 level. The euro is a touch weaker against the dollar and yields are down a tick or two.

Consensus – As suggested, it looks like the bottoming process is still in motion. Lots of unacknowledged damaged caused in the last few days. Adding to vulnerability has been the fact that virtually all corporate buybacks have been put on hold for earnings season.

Stay wary, alert and very, very nimble.

 

06 Feb

6 Feb: Cashin’s Comments

Thank you to Art Cashin for this analysis:

On this day in 1858, that august deliberative body, the U.S. House of Representatives was calmly discussing a matter of import to the nation. Well…..maybe “calmly discussing” misses the point. The House was in middebate/mid-filibuster on the topic of admitting Kansas to statehood…..and whether such admission should be as a free state or slave state.

The debate had been going since the prior day and as it moved into the wee small hours of February 6th the tension, partisanship and weariness began to show. Since night-time in February, in Washington, in the Capitol building, in the 1850’s tended not to be too warm, several members of Congress were said to have sipped (or gulped) some alcoholic beverages…..just to stave off the chill.

Rep. Keitt of S.C. made a rather uncomplimentary remark about Rep. Galusha Grow of PA. (who had the floor at the time). Rep. Grow responded with an equally unkind assessment of Keitt. Keitt went for Grow’s neck, but was knocked to the ground. Soon most of the House was wrestling, spitting, kicking and punching their worthy and distinguished colleagues. Spittoons and inkwells flew through the air. The Speaker gaveled for order with no success. The Sergeant at Arms beat members with his staff (in a non-partisan way, of course).

Rep. Grow was being pummeled by Barksdale of Mississippi when Washburn of Wisconsin rushed to Grow’s defense. Washburn’s intention was to grab Barksdale by the hair with his left hand and knock him out with a right uppercut. But when he grabbed Barksdale’s hair, it came off in his hand. Shocked, Washburn screamed. The rioting representatives looked up and saw a suddenly bald Barksdale…..and Washburn waving his wig. “My God, he’s been scalped!” shouted someone and the riot broke up in riotous laughter.

To mark the day, suggest to Congressional leaders that as they begin to debate the debt ceiling, they should consider appointing someone from the Hair Club as Sergeant at Arms.

It was the bulls that got scalped Monday as stocks continued Friday’s unravel.

Early Testing Fails And Leads To Trapdoor Plunge In A Vacuum – Stocks opened lower, circled the wagons and floated back up to the unchanged area. They then sputtered and began to roll over I sent this email to some friends:

Market going into the normal retest. If they test and re-hold the morning lows, the bounce could gather a crowd. If they make notable lower lows, it hints the process could last days.

They held the lows for a matter of minutes and then began to slip below. I then sent this follow-up:

Apropos my prior email, the markets appear to have failed the retest of the morning lows. If they bounce, they may then roll over and test the lower lows.

Traders will also look to other mileposts like moving averages, etc. S&P 50 DMA is around 2715.
Shortly before 2:00, the S&P began to test that 50 DMA. As you can see, the S&P is now testing the 50 DMA. Cross your fingers.

The testing lasted nearly thirty minutes. When the S&P broke below the 2715 support, it was as if a gun went off. Selling began to accelerate and bids rushed to cancel, creating the same kind of market vacuum that we saw late Friday.

Around 3:00, the trapdoor opened and stocks went into freefall. Media pundits reminded folks of the flash crash in 2010 and a few even speculated that some of Monday’s selling was due to rogue machines as it had been in 2010. I could find no such outages, only strained phone lines and the like, as a nervous public flocked to call advisors and funds.

The late air-pocket selloff took the Dow briefly below 24,000 before a mild rebound. Volume was moderate, suggesting that the lower prices were more a result of a buyer’s boycott than a stampede of sellers.

Contributing Factors – We find a lot of media chatter on the market “panic” and very little on contributing factors. Among these are margin calls, redemption selling and, equally, fear of redemption selling. Also, there is the popularity of ETFs, which are easy to sell but that can result in unrestrained selling in the equity components.

Also, there are ETNs set up against volatility. The VelocityShares Daily Inverse VIX Short-Term ETN, down 14% in session and down 59% more after hours.

Overnight And Overseas – In Asia, markets are playing catch-up to the recent sharp selling in global markets, particularly in the U.S. Tokyo was down the equivalent of 1100 Dow points and Hong Kong sold off more steeply. Shanghai and India were down a bit less drastically.

In Europe, markets are lower but somewhat less severely. Losses in Europe are more on the order of 400 or 500 Dow points.

Among other assets, Bitcoin dipped below $6000 before stabilizing slightly above. Gold is higher and pushing against the upper edge of its resistance band. Crude is weak again, with WTI trading around $63.50. The euro is basically flat against the dollar, while yields are a few ticks lower on a bit of a stroll to safety.

Format Explanation – We ask you to suffer through the replication of our intra-day emails so that you can see many of the market moves can be seen as probable or even predictable. If I waited until after the fact to describe the action, I think that would have less credibility.

Consensus – We will likely need a bit more whipsaw volatility to establish a viable trading bottom here.

Stick with the drill – stay wary, alert and very, very nimble.