Monday, December 24, 2012

Secrets Of $NYUD

There are often times when patterns on charts just get so confusing that even when we make a plea to the more common indicators for guidance, we find that they too offer little in the way of direction.  And then we have cute little incidents like the mini-flash crash in the ES futures that occurred on Thursday, Dec. 20th which took all of 2 seconds to cause the circuit breakers to trip and put a halt to trading due to a "limit down" event.  And of course all that excitement prompted Zero Hedge to quickly publish one of their patented bullhorn specials explaining How 10,000 Contracts Crashed The Market.  It didn't help much that at the time of this mini-crash event the clocks in Asia had already ticked over to the dreaded Mayan "time to pay the piper" date.  Surely the crooks who run the world were having the laugh of their lives at the sheer 'coincidence' of it all?

But then something funny happened on the way to the Forum.  Or should I say "didn't happen".  The markets opened on Friday morning with the majority of investors all around the globe expecting a minimum of 30 down points on the S&P 500 and the evaporation of 300 Dow points.  I even had visions of such a bloodbath myself.  Silly me.  Because what happened next was... well... nothin' basically.  Apparently somebody came to the rescue and all was well on Wall Street.  We survived the week and the world didn't end.

But let's take a closer look at what "really" happened all day long on Friday.  We begin by first taking a quick look at the mini-crash itself as seen on a 'still photograph' of the futures at the time of the crash as displayed at ForexPros.  [Helpful hint #224: click on any of the Indices you see in the Index column.  Once it opens, select the link to "interactive chart".  From there you can create the time frame of your choice on any of them.]

Ok, to begin our little investigation and analysis on just what exactly transpired during on Friday's apparently lackluster trading day, let's back up a bit and see what that mini-crash looked like:

Click on image for a larger version

Obviously as the clock ticked down toward the open of trading on Friday morning, it seemed apparent that all hell was about to break loose on Wall Street.  But surprise surprise, that's not what happened.  In order to provide a snapshot of the trading activity that occurred during Friday's session at the NYSE, and in order to relate it to the chart above, we take a look at a 5 minute chart of the S&P 500 in approximately the same time frame:

Click here for a larger version
As you can see, after the initial gigantic burst of volume during the first 60 seconds of trading things settled down very quickly.  Stick save in action.  Notice that volume dried up almost instantly as the market commenced to churn sideways for the remainder of the day.  Even the silly Russell 2 million put on a very brave burst in the closing minutes of trading... something I'm always more than ready to mistrust in light of the fact that the Russell is one of the favorite playthings of the venerable JPM theft machine.  In the chart below we see how the mighty Russell finished the day [please note that in order to provide you with intra-day volume data, in this case an extremely important metric, I have to use IWM as a proxy]:

[Please also note that on the charts below, clicking the charts themselves will enlarge them.  Clicking on the link below the charts will take you to real time data.  In a few days the following charts will be far enough into the past that they will basically no longer be useful.  But by clicking on the charts themselves, the image will be retained]

Click here for a larger version
Here's where this particular little study, one using about as small and sharp a focus as I ever employ, gets very interesting.  Note that as was the case with the $SPX, there was of course a huge spike in trading volume in IWM at the opening bell.  And as was also the case in the S&P, after the initial opening shock, volume dried up as the session evolved into one of those typically aggravating days of sideways chop.  But  what we were actually witnessing (in my humble opinion) was one of the largest offloading sessions by the big banks that we've seen in many moons.  Call me skeptical, but in light of the information you're about to see in charts below, as it was happening in real time I was not the slightest bit impressed with the volume spike seen in the chart above for IWM.  It is afterall one of the tools that JPM does in fact use in their daily arsenal to create smoke screens.  In fact, barring some sort of super impressive explosion higher in today's session, the last one before Santa arrives to use your toilet without permission, I believe the data shown in the charts below is a precursor to more downside action.

For those not familiar with $NYUD, it is a method of keeping track of volume by subtracting down volume from up volume.  The net result is a print that is either above the zero line (more up volume than down volume) or below the zero line (more down volume than up volume).  I keep this chart open every minute of every trading day but only have to refer to it a half dozen times throughout the session.  The reason is this: $NYUD has a proven track record of being extremely honest.  In the first 60-90 minutes of the trading day, the vast majority of days it sets the tone for what volume is going to do for the remainder of the session.  Once $NYUD has established its general trend in the first hour or so, it is extremely reluctant to change course.   Secondly, once the path has been established for the day, almost without fail there will be a huge volume burst in the final few minutes of trading which 'finalizes' that trend for the day.  Thirdly, and most importantly, on the rare occasions when we see the price action close in the opposite direction as $NYUD suggests price 'should have gone', it is $NYUD that speaks the truth.  The following day price will be proven to have been the liar and the vast majority of the time price will pay dearly for its sins.  Of course no indicator and no analysis is foolproof, but I've seen enough evidence of these phenomena that I have little choice but to go with the odds... they suggest Friday's action was a well crafted smoke screen.

We begin by looking at a 'typical' picture of what $NYUD would normally look like.  In the chart below the white line represents the entire NYSE ($NYA):

Click here for a larger version

Ok, here's where we get to the nuts and bolts of this analysis that I felt compelled to share with you today.  In the chart below we note that on Friday past, we saw the largest divergence in a long, long time between $NYUD and the price action in the indices, particularly that pesky IWM.  I almost think that I don't even need to explain the chart below any further, except for one small detail... I forgot to draw a couple of lines highlighting the divergence I refer to.  Nonetheless, you can still see that amazing occurrence in the image below:

Click here for a larger version

And finally to put Friday's divergence event into proper perspective, we take a look at how huge the down volume actually was when compared to what has occurred in recent months.  It's quite clear that this was an event that was very rare indeed.  I've broadened the time frame to 3 months+ in order to provide a snapshot of exactly how enormous the disparity was between down volume and up volume, not to mention that all of it was in direct divergence with price action.  One of them was lying:

Click here for a larger version

One important aspect to note is that each bar in the chart above covers 2 hours.  There is no overlap in those last 4 candles which provides further hints suggesting that it was an 'impulsive' event of massive down volume.

And finally, although we have seen days in the past with much more down volume, it is very rare that the market can make its way through the day by heading higher as it did on Friday.  Here's a picture of Friday's action as seen in a daily chart covering a year and a half:

Click here for a larger version

In conclusion, let me be the first to admit that I'm the king of the crow-eaters.  My younger brother and I used to kibitz each other (God rest his soul) about which of the two of us was more likely to end up with egg on our face any time we made some sort of claim that seemed even the slightest bit outlandish.  But whether the market bursts higher today and tries to make a liar out of me or not... I'm sticking to my guns on this one.  It's entirely possible that with what will most likely be a very small volume day today, the market could indeed burst higher.  But if volume does indeed end up being minuscule, I'll discount it.

In any case, this particular analysis is very valuable most of the time... and is something so worthwhile knowing that I'm more than happy to share it with my readers and followers.  In other words, on this particular occasion I'm willing to take one for the team.

And this time I can say with confidence that this IS the last piece I'll publish before Santa gets here.  So on that note I'd like to wish each and every one of you a most wonderful and happy Christmas.

Click here for your Christmas gift courtesy of Albertarocks

Tuesday, December 18, 2012

The Fiscal Cliff - A Beautiful Thing

Earlier today on Pretzel Logic's great site, a commenter posted a couple of charts for silver.  They give the impression that silver probably wants to fall further.  And judging by the weekly chart for silver it becomes apparent that it has basically been range-bound for about 15 months now, fluctuating roughly between $26 and $36.  True, that's a big range... one that has even been tradeable for those who don't mind a sideways market where moving averages become problematic and momentum indicators take over as the keys to finding entry and exit points.  But the point I'm driving at is that it appears silver will most likely be heading lower over the next couple of months at least.  Same story with gold.  It's even difficult to know which of those two would decline the most in percentage terms because the gold:silver ratio itself is also headed more or less due east.  But a closer look gives the hint that for a short while at least it will most likely be gold that outperforms silver.  A few weeks down the road though their rolls could reverse.  However, while all this is happening I think both metals will be falling.  Silver continues to under-perform for another 2 weeks or so, then gold takes over and begins to fall harder than silver, catching up.  Even if these views don't pan out exactly right, there's a much more important theme that I'm heading towards here.  On a side note, if you'd like to see an example of how 'great' analysis of Elliott Wave Theory should be presented take a look at the most recent installment by Jason Haver at Pretzel Logic's.  Amazing work.

Weekly chart of the Gold:Silver ratio.  Click here for a larger live and updating version.
If that brief analysis is correct, it would imply that the dollar should start to climb.  What in heck could cause that to happen?  The fiscal cliff, that's what.  I think the crackheads in congress are going to allow the budget to go over the cliff but I highly doubt that is going to be nearly as bad a thing as everybody seems to fear.  When was the last time your household suffered as a result of you tightening your spending belt?  In the short term, yes it causes some discomfort and probably a few weeks without your $7 Starbucks coffee and your favorite expensive ice cream before bed every night.  You'll eat ice cubes instead and pretend they're ice cream.  And somehow you'll survive.  Six months later you find out that by golly you've got one of those nagging debts already paid off.  A great start.

I think that's what's in store for the USA... the budget goes over the cliff.  Equities get slammed and probably hard and fast.  The dollar soars due to increased confidence overseas that maybe there is some fiscal sanity left in the USA after all.  So even though the mighty Thorin Bernankenbeard is going to print trillions more dollars, he's going to need them in order to continue buying up bonds... bonds that are likely to become even more expensive thanks to the fact that the entire global population will have earned a new respect for bonds as a proxy for slightly more fiscally responsible dollars.  If we go over the cliff, the following trades could pay off handsomely; long TLT, short gold and silver, especially silver, long the dollar and short equities.

The alternative to going over the cliff
That scenario does not represent anything even remotely resembling the end of the world for the USA.  It will at first but that would be a misguided view.  In the long haul it would be magnificent if the stupid bastar bastages in congress pull off the surprise of the decade and just let 'er roll over into the abyss... just like the party-boy who fell out the bedroom window of his girlfriend's apartment on the 34th floor, screaming like a 6 year old girl all the way down... and survived.  He survived because he only fell 3 feet onto the nice balcony just below her window sill.  He stood up, realized that he was still alive and had an instantly renewed appreciation for the beautiful view of the great city sprawled before him.  Then he barfed over the balcony.  But that was only because the bugger was pissed to the eyeballs... a totally irrelevant factor.  Why else did you think party-boy fell out the window?  But that's all that would happen I think... America falls out the fiscal window and crashes 3 feet below on a nice lawn.  There's hope after all.  Equities would get slammed but the country wouldn't.  The economy certainly wouldn't start to improve immediately, but over the long haul without a doubt it would end up far better off as compared to what it will look like if nothing at all is done to curb the annual deficits and the overall debt.

To me the views expressed above make the most sense "as long as we go over the cliff", which is what I think is going to happen. If that's what happens, then this article by Bill Patalon, executive editor of Monday Morning would go a long way toward explaining 'why' I could be right about all this.  I admit that I couldn't possibly quote the actual numbers like Mr. Patalon did so I wouldn't have been able to explain in defined terms why I hold the views I do... only in general logical terms such as "it makes sense that your household debt will become more manageable if you stop spending like a drunken sailor".

So don't fear the cliff my friends... embrace it.  Rejoice and short the hell out of equities for a while.   Not yet though, we have to wait until some time closer to the announcement that a deal has not been reached, that it's too late and that we're going over the cliff.  I'd fully expect equities to keep soaring almost until the last moment, based on hype, lies and spin stating that the likely outcome will be "Yay, we've all been saved!  Yay, we're not going over the cliff, we're going to go hopelessly further into debt.  Yay!  We're all saved!  Santa has arrived.  See, stocks are soaring.  Everything is great because we're stupid!  Yay!"  Horsepuckies... the cliff would be the best thing to happen to America in two decades.  But not for equities, at least not at first.

Merry Christmas from Alberta, Canada to friends of this blog from all over the world.
In case I don't publish anything else between now and Christmas, let me take this opportunity to wish each and every one of you the most beautiful Christmas you've ever experienced.

Wednesday, December 12, 2012

It's Official - Today's Fed Statement Signals " QE FOREVER"

Well the Fed did it again today... extended quantitative gorging-on-fiat indefinitely.  By adding a new component today to their strategy (a new justification) Bernanke, in the most conniving and sneaky fashion,  gave himself the green light to justify more debt monetization until hell freezes over.  Because that's how long it's going to take for the unemployment rate in the United States of America to drop below 6.5%.  

It's simply amazing to watch the charade continue that seems like it's right out of the Twilight Zone.  Prior to the addition of today's new qualifier, all the Fed had to do was to simply continue to lie about the rate of inflation in order to justify money printing on an ever-increasing scale.  But in light of the fact that to continue to hide the current horrid rate of inflation in the areas that hurt us the most (like soaring food prices) is becoming more and more difficult, nearly impossible, a new metric had to be introduced.  By making it official that future decisions by the board of governors will now be tied not only to the rate of inflation but to the rate of unemployment, a major step has been taken in which the Fed has paved the way for justification for future insanity on their part.  And of course in the insidious modus operandi typical of psychopaths who patiently work toward their goal of ruling the entire world, gradually over time the peg-to-inflation aspect will quietly drift off to the land of the forgotten.  In the months and years ahead the 'inflation' aspect will be spoken about less and less often and will instead be replaced with ever-increasing focus on the employment rate as being the key determinator.  In essence today's statement opens the door for the Fed to supply the drugs to a hopelessly addicted government for perhaps the next 20 years.  This is probably as good time as any to ask Chairman Bernanza exactly what it is that he's been smokin' because the country and the currency won't last another five years at this pace let alone twenty plus.  Surely Bernanke knows this?  Let me answer that question for you.  Yes, he does.

Today's Fed statement read, "In particular, the Committee decided to keep the target range for the federal funds rate at zero to one-quarter % and currently anticipated that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6 and a half percent, inflation between one and two years ahead is projected to be no more than a half percentage points above the Committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored.  The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy."

Up until now the target date for the end of the policy of supplying more and more green powder for congress to blow up their noses was "sometime in 2015".  With today's statement the Fed has extended that date essentially to eternity because let's face it, as long as the once-monumental manufacturing sector of the formerly-great USA continues to leave America for foreign shores, the unemployment rate is never going to drop below 6.5%.  NEVER.  It's going to balloon to 20% and higher.  Eventually the rate of unemployment, which is already grossly under-reported, will also become nearly impossible to hide any further.  I expect that sometime after 2016, with bodies piling up in the streets, the ability to hide the rate of unemployment no longer be manageable and will have to be be replaced with a new and fresher "qualifier" that would justify even more QE.  I'm guessing it will be something along the lines of "once the economy has improved to the point where the annual suicide rate drops below 65 per thousand we would feel quite confident that we may be able to sell a few bonds back into the system".

We have to recognize the reality here friends.  The global central banking cartel are going to print forever.  Let there be absolutely no misunderstanding about that.  Because the only alternative is literally to allow the greatest bond market crash in human history to occur.  That would destroy not only the entire global economic network but the bankers themselves.  Which more or less makes their long term itinerary a crystal clear no-brainer, does it not?

Until next time...

Tuesday, December 11, 2012

Meet Mark Carney As Canadians Know Him

Goldman Sachs Golden Sax
As many of you know, a blockbuster announcement was made on Nov. 26th that governor of the Bank of Canada Mark Carney would be taking over as governor of the Bank of England on July 1, 2013... Mayan calendar apparently a non-issue inside the global banking circles.   This has to be one of the most incredible decisions in English banking history, considering that ever since that venerable bank was established in 1694 England has never relinquished that powerful seat to anyone but an Englishman.  That move raised a lot of questions, a lot of suspicions and as Zero Hedge loves to point out, it pretty much put the finishing touches on the fact that ex-Goldman Sachs monsters were at the helm of most, if not all, the central banks in the world.  So who is Mark Carney and what makes him so special?

Rather than going to the trouble of reiterating what I've been telling a few of my friends abroad about Mr. Carney, I'm going to take the lazier route and simply copy and paste a comment I'd made recently to a great friend of this blog, Chartrambler... himself an Englishman who wanted the straight goods from a Canadian who knows Carney, on "what's this guy all about?".

I felt this was an opportune time to publish this particular post because as some of you know, BNN (the Business News Network) keeps an amazing video library to which they add videos on every segment of their programming day approximately 45 minutes after they have aired live in Canada.  Mr. Carney was featured in one such interview that ended only moments ago.  It's a relatively short segment but it will serve very nicely to let people see how Carney operates and what it is that makes him so personable.  For one thing he's a straight up guy who does not present an arrogant persona in any way.  He speaks to people with the good manners of a friend sitting across the coffee table.

At this point I briefly debated about whether I should place the video right here at the end of this sentence or at the bottom of the post.  I opted to place it at the bottom of the post for what I think is a rather important reason.  I'm hoping you will read my comment to Chartramber before you watch the video so that in the event you have already developed an innate hatred for Carney due to his Goldman connections (for which I normally would be right there shoulder to shoulder with you), I would only urge you to consider reading what I related to Chartrambler regarding what Canadians have experienced so far from Mr. Carney.  He has been absolutely stellar for Canada and needless to say we sincerely hope he will serve England with the same degree of responsibility and superb helmsmanship.  Make no mistake, the man is a powerhouse on a global level.  And despite those who are already looking for cracks in the man's armor, pointing out that he was in charge of the BOC during the worst housing bubble of all time, he absolutely did save Canada from the madness of liar loans, etc.  The types of loans permitted in Canada during those bubble years were nowhere near the same as the jaw-dropping nonsense that banks not only permitted in the USA, but encouraged.


"Hola Señor Banquero.  Mi nombre es Pablo Pila de Dolor.  We would like to take out a mortgage for about $492,000.  I work flipping many hamburgers and I'm certain I have good job security because I've been at the same company for 14 weeks now.  I earn $82,000 per year in that position."  To which the banker replies: "Awesome.  That's a truly impressive resume you have there Pablum.  So let me see... you'd like to borrow $492,000 to go along with your own $6,000 in order to purchase this lovely home for $498,000.  You're going to need to furnish that house too I'd think, so whataya say we just round the loan off to $600,000.  That way you and the lovely Señora can take a relaxing vacation to some exotic country while you await possession date on your new digs.  How does a beautiful vacation in Cancun sound to you?  What? You were born there?  Oh, then how does some other awesome South American destination sound?  Like Italy!  Does Italy sound good?  You and the Missus can visit the pyramids and everything.  Been there myself... loved it.  Hahaha... oh never mind, it's none of my business what you do with your new money.  Sign here.  Have fun!


What follows is what I reported to Chartrambler over a week ago.   Please recognize that this comment took place as part of banter between two friends and is therefore not quite "article" material.  I thought it prudent to edit a couple of the words.  Here goes:


Thanks CR... glad you like the little diatribes that I post every once in a while.  Yeah, Carney is a whole incredible story by himself.  I'm so painfully torn about what to think of him.  He's a Canadian and as you know all Canadians are good :-)  That's partly why they chose him... to promote the idea that a pristine banker coming to the rescue can only be a good thing.  He has been called the "only respected central banker left in the world".  And he 'is' very respected, which is partially what makes him so scarily powerful.  He's such a confident individual, intimidated by absolutely nobody, that he's probably too formidable for pretty much anybody to tangle with.  Jamie Dimon found that out the hard way when that arrogant basta prick buffoon attacked Carney for stating that global banking had to be totally reformed.  Dimon attacked and the stupid little punk took a one-punch knockout for his troubles.  But the fact of the matter is that Carney is an ex Goldman guy.  By that metric alone, and by default, that means that inside he's a satanic bastard who will just pull the banker wagon onward in history toward their ultimate goals.

On the other hand, he's an incredible story.  He came out of nowhere... born way up in the Northwest Territories.  Seriously man, that is Eskimo country... literally.  I mean Fort Smith is a little town out in the middle of a vast frozen wasteland 400 miles from the nearest tree.  Both his parents were teachers.  He and his brothers all ended up at Harvard which is where he no doubt met the ruling class.  The women say he's good looking but I reserve judgement on that.  I can say though that he's charming and very respected at home and abroad.  He's scary smart.  I'm talking "brilliant" when it comes to damned near everything, including maintaining a pristine public image and a very high degree of "likability" as opposed to the arrogance that banking pricks like Dimon and Paulson normally exude.

So in a nutshell Carney is attractive (according to some of the ladies of the world), clean, charming, brilliant and appears out of nowhere.  Does that not fit the description of the anti-Christ?  Yes it does.  I don't want to believe it.  I want to believe that Carney will shape up the Bank of England and drive all the serpents out.  But wait... he's a Goldman guy, which is first and foremost.

When you get to see more of him over there you'll instantly recognize what I'm talking about.  The guy is just so sharp, clean and likeable that you'll be impressed.  The people in England are going to fall in love with this guy.  That's what makes him potentially so dangerous.  Is he good or is he evil?  One thing I know for sure is that he completely protected Canada "from" Goldman which is partly why at the current time Canada is one of the only sparkling gems left out there.  We know that won't last of course if the shit hits the fan but at least Carney has protected us from Goldiesatan so far.  Can he do that for the whole world?  Does he want to?  Let's keep our fingers crossed but I realize... he's an ex-Goldman guy.

One final note... he used to be a goalie in hockey and if anybody can make a stick save it's a hockey goalie.  I don't really like the implications of that.


If anyone might be interested in reading more commentary that was exchanged between myself and other persons curious about Mr. Carney, most of them occurred in the comments section on my last post which can be found here:

Here's the link to the Carney interview which aired in Canada about an ago (December 11, 2012).  This is Carney as Canadians see him on a fairly regular basis.

Hasta luego...