Mini Speed Dating Rotation Started

The week of Dec 17th, the trading range of the past week(s) started to rotate between sectors.
Large Caps were hit slightly, with Small Caps taking the lead the week of Dec 22nd.
(Saved but unposted. Past comments always look better in the future, right.)

Goldman Executive Pay In Stock With 5yr Redemption

Goldman Sachs (GS) will be offering "special" stock compensation with a five year redemption period.

NY Times headliner: Goldman Sachs Alters Its Bonus Policy to Quell Uproar

Consider this, when does management not pay cash bonuses for top execs for the next year? When it does not have cash to pay said bonuses for the next year. Why did the company choose "special stock"? Because "special stock" can have profitability guarantees or special exercise rights.

Quoting the NY Times article, "Mr. Blankfein, who declined a bonus last year, received a $53.4 million bonus in 2007, a Wall Street record. This year, he and other top executives will receive bonuses in the form of what Goldman called “shares at risk,” or stock that cannot be sold for five years and can be retracted if the executive does something reckless or risky that hurts the firm."

Sounds great for the shareholders, very politically written, but something is in the wind. Especially watch for other banks to initiate similar deals. The public has been told about the "risk" details, but not the reward or special provisions.

These five year retainers may stagnate the growth potential of Goldman, because each executive's decisions rides on avoiding risk or reckless behavior.

The Last Bear Raid

The Last Bear Raid

(Or was it?)

"Melt-up" vs "Melt-down"

There appears to be an equal potential for a 'melt-up' or a new cycle down. Professionals and institutions are selling off what appears to be a topping process, and adding short positions. Given the recent predictable history of the cycles down (about every 20+ trading days), I'm leaning toward the premise of a market surprise to the upside (ESZ09 1120+), followed by a harder correction back to 1050.

The Parabolic Swing & Grind

Yesterday, the 5m chart showed a powerful set of parabolic swing reversals. Trend lines broke easily and needed to be redrawn constantly. This is the nature of parabolic moves. Parabolic moves might imply the bulls and bears have their stops placed close above/below the trendline(s). Once the parabolic move ends, the reversal is just as violent, as the volume dries up in the direction the parabola moved.

There were a few instances of sharp downturn and slowed descent, where the parabola down was slowed potentially by more 'conservative' bulls. But once the cup of support broke, the price easily cut new lows for the day.

Beware, parabolic moves have violent reversals. If yesterday was a fractal of future market events, exercise caution, a big move is brewing. And OpEx week (next week) should be full of thrills and chills as it grinds more nerves to a pulp.

Unemployment, a Surprise?

8:30ET Unemployment Rate for Oct 10.20% Current; 9.90% Consensus; 9.80% Previous

Some say the Unemployment Rate is a trailing indicator, however it needs to improve eventually for the economy to grow.
Yesterday's productivity numbers should encourage businesses to go lean and mean, being more productive with fewer workers. The extension of unemployment benefits recently passed may stimulate Christmas shopping for a few. It is more likely the crippling of consumer credit and the jobless will cancel a Christmas rally, and unemployment figures will go well beyond previous estimates of 11%, due to an increased length of unemployment benefits.

The wall of worry is growing.

Many are pointing to SPX 1066 as a pivot point. This morning's unemployment figure re-enforced that. Looking at my own recent ES chart shows a significant amount of potential support in the 1055-1040 range, which could quickly turn into a bull selloff. Today, it is very probably that ES 1059 will be tested for support or resistance. This morning's selloff on the 5 minute chart is a pretty convincing Elliott wave, which typically lead into a short term consolidation triangle pattern.

Shorter Term Flattening Equity Curves

The "Spys Like Us" Strategy has been in cash lately, letting me evaluate the signals and strategy closer. There have been past periods when the equity curve went flat (which is much less frustrating than periods of grinding higher with only slight gains). Market exposure is a combination of the amount of money in the market and the amount of time that money is in the market. Additional exposure may be increased once the gains outweigh the risk.

Momentum Trending Intraday, Failing To Climb Higfher

Momentum is trending intraday on many stocks such as AAPL and JPM, but failing to gain higher ground. The short term outlook is consolidation, but the mid-term could stretch SPX to 1090, given the tech sector has room to climb higher in both monthly pivots and monthly fibs.

Economics & Fibs

Initial jobless claims increased to 551k.
Yahoo posted a new number: "Continuing Claims" which shows a decrease in potentially the bigger unemployment picture.

Rough ESZ09 intraday fibs for 10/1/09: 1064.50, 1059.25, 1055.75, 1053.00, 1050.25, 1046.50, 1041.50. Intraday, these may become turning points for support/resistance. The 2 day, 5 min, chart shows significant volatility, potentially a bearish short term, with potential for another swing up.

Hot Potato

The intraday grind of Sept 22, 2009 demonstrates indecision in the market. Many are saying the market is due for a correction. This is all talk, until the tape confirms it. The bears have been ineffective (even for mean reversion strategies) and this feels like a surging bull market with blinders on, given almost every 1/2 percent drop finds equity buyers.

So, the game of hot potato continues, as the hottest asset class this year (equities) have recovered significantly (> 50%) from March 2009's low.

Telling Fibs

Rounded ESZ9 Fibs for today: 1073.50 1069.25 1067.00 1064.75 1062.75 1059.75 1056.00 1052.50

Rounded ESU9 (expires today) Fibs for today: 1074.50 1071.50 1069.50 1067.75 1066.00 1064.00 1061.00 1052.50

Fibs have been interesting intraday pivot points of support/resistance for the past few weeks.

VZ Ready and Set for a Drop to $28

Mid term bearish descending triangle. Started in August 09 around $32.50. Support shown at $32.00. Drop estimate: -$2.50 to 27.50. More likely it will find support at $28.25. Completion timeframe: Oct 2009.

Longer term bullish ascending triangle. Run 1, Mar-Apr 09. Run 2, Jul-Aug 09. Ascending resistance at $32.25 or so. Completion timeframe: Nov 2009.

Any calendar spread recommendations?

Three Day Forecast Results

In a wonderfully twisted way, my Saturday three day projection fulfilled in the ES futures prior to the market open on Monday. The ES dropped to 1032 and lingered prior to the Monday open. The SPX opened at 1035, and promptly launched to 1045. Another great example of the market fulfilling chart patterns in unexpected ways.

A 1 hour chart potential drop to SPX 1032 did not occur, but neither did my guess for a smaller 1 hour H&S. There are a handful of 5 minute chart examples showing that H&S patterns are fulfilling. This could be the start of a larger H&S fractal on everyone's mind. Many bears are feeling hurt from the last failed H&S (8/17/2009). These are baby bear steps shown on the tape.

Elliott says to me, the SPX daily has a little more room to start a wave 4 consolidation or wave 5 up again. Either way, the OPEX week bump and grind should continue.

SPX Three Day Prediction

Given the current scenario, SPX 1032 and 1035 are likely fib. S/R levels. A move up to revisit 1045 or consolidation down to 1039 could form a bearish 1 hour chart head & shoulders pattern to fulfill SPX 1032.

Full Moon.. Markets on the Prowl

Any moon traders out there? The past few days, the night-time moon has been quite bright. People make irrational decisions and become bolder in their convictions. Some of that effect can be seen in the recent plummet of the market.

The hourly SPX could be an Elliott wave 4 (consolitation), because the past three days sure look like an impulse wave 3 (due to the higher relative volume) or less likely, exhaustion wave 5 . On a multi-year daily chart, SPX could still be in an Elliott wave A (down), where 10/07 was the end of exhaustion wave 5 up. 3/09 could be the end of this larger wave A down, but given the timeframe, and failure to break the downtrend from the market peek to date, wave A down will likely continue on the weekly timeframe. This does not rule out a bull exhaustion to the 1030's, followed by a more significant correction.

Gov't Banks Coin on Banks

The banks payback of gov't obligations has potentially net $4B. (http://www.nj.com/news/index.ssf/2009/08/us_government_makes_4b_profit.html)

Good news, except for banks that are not ready to pay back Uncle Sam.. e.g BoA and C. It seems JPM and GS are the best positioned right now in terms of gov't obligations being cast off.

What About Underwear?

GDP, less bad, still negative.
Consumer confidence highest since Aug 2007 (recent market peek).
Jobs, still purging at over 500k/month.

But, men's underwear sales are improving.. so the recession must be over, right?

Fidelity Leveraged ETF Agreement

Sign of the times. Wield leveraged ETFs (from Rydex, ProFunds, Direxion, ProShares, PowerShares, or Van Eck Associates), and you now first see:

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ST, LT Predictions

Short-mid term: potential short cover rally to 1050. (Bull* rally continues)
Mid term: potential fall to 950. (Elliott)
Long term: potential drop to 460. (Fib & Gann of highs & lows)

Fractal: There is high similarity to the 2000-2003 bear market drop. We may be in a 2003-like recovery stage, entering a new bull market for 2-3 years, or possibly the 50% run from the March 2009 based on vapors, and we form a secondary 'M' (double top) pattern, starting the market on a run to retest the March lows at 'the devil's bottom' (SPX 666).