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Thursday, June 28, 2012

H&S Warning

It's a real crapfest on the headlines front:  JPMChase faces trading losses of $9 billion instead of $2 billion; the rumor about Germany backstopping euro credit was false; Obamacare is alive and well; banks are actually manipulating LIBOR for their own benefit; Q1 GDP was left unchanged at a pitiful 1.9%...

Quick, which one of those wasn't entirely predictable?  Exactly.

Even so, the market just fell out of our channel.   I can live with an intra-day departure as long as the little H&S pattern doesn't play out (1309ish.)  Keep an eye on this guy.

We had a similar dip the day before Q1 ended, too.  March 29 opened at 1405, dipped to 1391, and closed at 1403.  Money managers like to end quarters on an up note whenever possible.  This feels like a fake out.

BTW, JPM's trading losses are probably much bigger than $9 billion, too.  If you haven't read it yet, this might be a good time to peruse The Wipeout Ratio.  JPM has $78 trillion in derivatives.  Even $9 billion is a pittance --  0.011% of the total.  I have to think they experience $9 billion swings every time Jamie Dimon gets the runs in his silk boxers.

UPDATE:  2:20 PM

While we're at it, the 1309 SPX level looks like it's probably linked to 83.182 on DX.  As we discussed above, 1309 is the area where a H&S pattern completes on SPX.  83.182 on the dollar is the area where: (1) a Gartley completes, and (2) the previous H&S pattern starts to be compromised.

A lasting push beyond 83.182 (or below 1309 on SPX) would potentially change the picture.  Stay tuned.

UPDATE:  4:30 PM

We got the rebound we were expecting.  SPX never dipped below 1313.29, leaving a nice long shadow on the daily candle and closing well within our channel again.  Just like March 29 (mentioned above), we lost a net 2 pts on the day.

DX got up to 83.07, and closed at 82.91 -- leaving a spinning top on the day without exceeding the previous presumed shoulder that should see DX sell off substantially over the coming days as stocks move up.

The yellow line marks the forecast I last updated on June 10 [see: Currents, See?].  Check in later for tonight's post on the dollar.  I'll have a complete discussion and updated forecast.

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These are the actual posts members received during today's session.  

While many investors were wondering when they should pull the plug, pebblewriter members had an actual number based on a forecast made over a week ago and updated first thing this morning.  And, while many other investors sold at the lows, pebblewriter members either covered their earlier shorts or simply held on to their longs for the rebound.

I don't always get it right.  But, our calls have been pretty decent.  Investors who simply bought SPX when I called a bottom and sold short when I called a top would be up over 36% since the site's inception about three months ago (details here.)

We're down to the last 6 charter annual memberships.  Charter members have their rates locked in for the life of the site.   No increases, ever.   Join with a friend and you can both knock another $200 off.  If you're not ready for the full monty, pick up a monthly membership for the cost of a night out. 

I look forward to seeing you at

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