About this time last year, COMP had been having trouble breaking out.  In our October 2016 Update, with COMP at 5312, we suggested it wasn’t quite ready to do so.  Speaking of the faltering, concentrated leadership…

In other words, if this very small cadre of stocks with PE ratios in nosebleed territory lose momentum, COMP will test 5132 again.

One month later, COMP tested 5132 yet again.  On Nov 2, it closed below it.  As the March 2000 (tech bubble) high, 5132 was critically important.  A convincing breakout past 5132 would mean everything was officially awesome.

But, breakouts were hard to come by.  COMP tested 5132 8-9 times between Apr and December 2015 before giving up and tumbling nearly 20% into Feb 2016.

The next successful assault came in Jul 2016, but was followed by two backtests which dipped back below 5132 in Aug and Sep.  The November backtest turned into more than a backtest.  COMP closed below 5132 in the course of a 9-session losing streak (-5%) that dropped it below the SMA100 as well.

Timing, as they say, is everything.  Luckily for COMP, this breakdown occurred just a few days before the US election [see: Why the Trump Rally is a Fraud.]  Like all other equity indices, the effects of the USDJPY and oil ramps and unprecedented VIX smackdown were immediate and are ongoing.

COMP closed back above the SMA100 the next day, and has remained above it ever since — a gain off the Nov 4 lows of about 35%.  As we glide into year-end, it’s a good time to review where the index stands and what might come next.

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First, the big picture shows that, after failing to follow through on the completed H&S Pattern that would have seen it backtest the purple midline, COMP has broken out of the top of the rising red wedge.

This is comparable to virtually all the other equity indices we watch.  It wasn’t enough to push higher within existing patterns that were already rising rapidly.  It broke out of those and has established an even steeper trajectory.

At this point, it’s pushing into the top quadrant of the rising white channel where it will soon reach the top of the rising purple channel — currently at 7260.  It probably won’t stop there, though, as the 1.618 and the rising white channel intersect at 7619.37 at the end of the year.  It’s too convenient a target to ignore.  And, I fully expect it to reach it unless we get a nasty surprise on the geopolitical front.

There’s even a channel within the channel that could help guide it to 7619.If worse comes to worse, there is decent support not far away:

• bottom of the red channel, currently at 6530
• the SMA100 at 6400
• the SMA200 at 6170
• the 1.272 at 6227
• the white midline at 5785.

I don’t think it’ll come to it, but the SMA200 is about to cross the red wedge top at 6227.06.  If, for some reason, stocks started selling off and COMP reversed here, that would make for a nice 8% short.  I would only attempt it if COMP fell below its SMA10 (currently 6682.93) and kept going.

The way things have been going, it would probably take all-out war somewhere in the Middle East or the Korean Peninsula to kick things off.

GLTA.

 

 

 

 

Last month, the Bureau of Labor Statistics flat out falsified the price of gas used in calculating CPI [see: Oct 3 Update on Oil.]

This month, the deception was a little more blatant.  The price of gasoline registered by the EIA was as follows:

Note that it starts out high, then decreases each subsequent week until the end of the month, where there’s a tiny increase.

For comparison, here’s what the spot price of gasoline actually did during the month of October.  It starts out by dipping a little, then rips higher through the end of the month — completely out of sync with the price data incorporated by the EIA.Just for grins, here’s a price chart from GasBuddy.com – arguably an observer without an agenda.  The price starts out around 2.50, like the EIA data.  But, it never dips below 2.44, let alone approaches EIA’s 2.406.

Conclusions?  Like last month, the EIA reported prices lower than actually experienced in the real world.  In addition, prices in the real world completely ignored the sharp increase in spot prices seen in the commodities markets.

What gives?

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Another overnight smackdown on VIX, which has managed to keep futures barely in the green in spite of an employment figure that hardly inspires confidence in a rate hike.continued for members… (more…)

Futures sold off sharply overnight when rumors surfaced, indicating the coming GOP tax plan will feature temporary tax cuts for corporations.  Powell’s rumored appointment was fuel to the fire.  The dollar dropped like a rock, which sent USDJPY plunging below technical support. As it so happened, it was the sell off that was temporary.

ES, which reached 2585.5 as SPX tagged our 2587.55 target, spent the rest of the night in intensive care.  As I write this, DXY and USDJPY have recovered most of their losses and ES is back to even.In the old days, when central banks didn’t guard against every little dip, ES’ drop to its .618 at 2563.50 would have presaged a similar retrenchment for SPX (2565.18.)  With multiple targets at 2565 and below, what are the chances?

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October felt like more than a 2.2% month for SPX.  Maybe it was the fact that we had so many gap openings.  Or, that the backtests couldn’t quite backtest.   Maybe, it was just the channel that so convincingly broke down was suddenly resurrected the very next day — as though nothing had ever happened.

In the end, the month was characterized by a continuation of the VIX-driven algo-dominated meltup: 38 straight sessions (beginning 9/11) of VIX lurking below the bottom of a long-term channel, the bottom of which it used to tag once per year.

Even the talking heads are starting to question the quality of the rally.  But, it’s still a rally.  And, as long as the algorithms take their marching orders from a VIX that manages to make new lows, the rally will continue.

Last night, VIX dropped an additional 3.5%, sending futures up about 12 points to tag resistance yet again.

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Another after-hours, another VIX dump and ES pump.  But, this one looks a little different from the others.DXY is still wobbling a bit, leaving USDJPY in backtest mode.  With one session to go, can October pass without dealing any tricks?

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Everybody who’s ever been on horseback knows this term.  Horses instinctively know when the ride is nearly over and they’re headed back to the barn for some oats and grooming. They get a sudden burst of energy that can catch their riders off guard.

The market undergoes a similar phenomenon most years.  Everything from performance figures to bonuses are tied to a successful end of the year run.  With November just around the corner, I think traders have picked up the scent.

It remains to be seen whether central bankers and their new ringleader (to be named Thursday) can get to the barn without any major trip-ups.

Gold reached the top of our downside target range on Friday, meaning the dollar’s run might be nearing an end.

We’ll update the dollar, USDJPY and oil/gas in today’s post and see if we can discern which path they’ll take over the next two months.

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This morning is all about tech, with GOOGL, MSFT and AMZN all beating estimates — kinda like Q3, GDP, which improbably ignored two major hurricanes and came in at 3%.

Not known for questioning the veracity of official government data, S&P 500 futures are up 5.5 points.

As a result, ES has broken out of its latest minor falling failing channel and popped back above its SMA10.  The purple acceleration channel that dates back to Sep 11 is still alive.  I’ll be watching the USD and its reaction to gold, which is about to tag our downside target.  The dollar’s rise, and its impact on USDJPY, has been instrumental to stocks’ ongoing rally.

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The ECB’s taper is about as dovish as anyone could expect.  Markets have barely budged, so far, with a 3.3% additional decline in VIX following yesterday’s backtest dispatching any jitters and keeping eminis in positive territory.continued for members…
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It’s move-in day in the new digs here, and I’m eagerly awaiting the FIOS installation guy.

Things are pretty much on track, with ES off 4 points and about to test its SMA10 and SMA5 200 at 2560… …despite USDJPY’s continued breakout.Kinda makes you wonder where equities would be if USDJPY hadn’t executed this bogus rally.

Our equity, gold, WTI and RBOB targets remain in force.  I’ll post more after the internet is up and running in a couple of hours.